By Greg Peel

The Dow fell 32 points, or 0.2%, while the S&P lost 0.4% to 1676 and the Nasdaq slipped 0.3%.

After a period of extreme volatility, Bridge Street has suddenly gone very quiet. To some extent this reflects the fact the Aussie, while still making some sharp intraday moves, appears to have settled in the low 90s for the time being. Foreign selling has eased off. Yesterday we pushed up against longstanding resistance at the 5000 mark in the ASX 200 once more, then backed off. As to whether that level can be breached will possibly come down to what Ben Bernanke says to Congress tonight, but in the wider scheme we are rapidly approaching the local earnings season, when reality sets in.

Doubts crept in to previously definitive expectations of an RBA rate cut in August after the release of the minutes of the July meeting yesterday. After months of head-scratching over why the Aussie was so high, the central bank is now wary of the lower Aussie sparking inflation. Although as the following paragraph from the minutes suggests, the board is hardly in panic mode:

"The news in recent months had generally been consistent with the outlook for growth being a little below trend and inflation remaining consistent with the medium-term target. The most significant change had been the depreciation of the exchange rate, though members noted that it remained at a high level. The depreciation was expected to add a little to inflation over time, but the forecast was for inflation to remain consistent with the target. Members noted that it was possible that the exchange rate would depreciate further over time as the terms of trade and mining investment declined, which would help to foster a rebalancing of growth in the economy."

Obviously the RBA is now looking to see just how much effective "loosening" can be achieved by the lower Aussie, thus negating the need for a lower cash rate. But we're certainly not at that point yet:

"Given the exchange rate adjustment that was occurring, and with the substantial degree of monetary stimulus already in place, members assessed the current stance of policy to be appropriate for the time being. The Board also judged that the inflation outlook, although slightly higher because of the exchange rate depreciation, could still provide some scope for further easing, should that be required to support demand."

The June quarter CPI result will be released next Wednesday, and the next RBA meeting is two weeks later. Meanwhile the forex market decided yesterday that an August rate cut was now off the cards, or at least less likely. Throw in last night's fall in the US dollar index of 0.7% to 82.46, representing a square-up ahead of Bernanke, and the Aussie is up one and a half cents over 24 hours to US$0.9252.

Wall Street appeared pretty much in wait and see mode last night. At one point the Kansas City Fed president spoke out to suggest tapering should begin "sooner rather than later", which did not help the indices push further into blue sky. It's now at the stage where Wall Street is wishing these junior Fedheads would just shut TF up and end this unnecessary confusion, and leave the chairman to be the sole conduit of Fed consensus.

US earnings were in the frame last night. Johnson & Johnson (Dow) posted a beat and saw a mild share price response, while Coca-Cola's (Dow) result disappointed, with the company blaming the weather, among other things. Globally?

Despite doubling profit from the same quarter last year, Goldman Sachs saw its share price ease off as concerns mount with regard to new capital regulations. After the bell, Yahoo failed to excite and its shares are down 1% in the aftermarket.

On the US economic front, the NAHB housing sentiment index has risen to 57 from 51 last month, to its highest level since January 2006. With numbers above 50, the index has now moved into the "more optimistic" zone having gradually become "less pessimistic" over recent years. Industrial production rose 0.3% in June, beating expectations of 0.1%. The result represents a quiet turnaround from April's minus 0.3% and May's flat reading.

The June CPI came in at 0.5% on the headline, with fuel prices the major factor, and 0.2% on the core reading. Both numbers were in line with forecasts. Headline CPI is running at an annualised 1.8% -- not enough to force immediate Fed tapering.

Over in Europe, markets were surprised with an unexpected drop in the ZEW investor sentiment measure, which came on the same day as a surprise jump in the eurozone's trade surplus. The issue is, of course, that there's Germany and then there's everyone else.

The LME liked the major data overall last night, with increased US production a positive. The weaker US dollar helped base metal prices to smallish rises, with copper up 1%. The oils were undecided, with Brent rising US31c to US$109.40/bbl and West Texas falling US46c to US$105.86/bbl.

Spot iron ore rose US$2.10 to US$129.00/t.

Gold rose US$7.40 to US$1292.30/oz.

The SPI Overnight was down 6 points.

Today sees production reports from BHP Billiton ((BHP)), Gindalbie ((GBG)) and Iluka ((ILU)).