FX Market Commentary – 8th February 2012

We had a couple of key price points breached last night, most importantly was the Euro breaking through 1.32 USD as it emerges that we may be at a point where Greek Austerity measures will be agreed to.  The Euro was bought consistently through the US session as it climbed one and a half cents peaking at 1.32694, as the Euro has not traded at this level since early December. The phrase "final draft" buoyed markets that the finish line is within sight finalising the 130 billion Euro rescue package and paving the way for a 14.5 billion dollar Eurobond that is due March 20 to be paid avoiding default in the near-term albeit once private bondholders have also agreed to the swap deal.

The Australian dollar was also a remained we bid in the aftermath of the RBA decision yesterday trading in a 50 pip range through the two overnight sessions and sat at 1.08 as the US session ended.  Looking closely at the statement Governor Stevens has left a couple of check points for future meeting and rates movements that we should all note before the next meeting.  That overseas pressure has alleviated and key indicators are within their target bands.  That three overseas factors remain central; China not slowing down as much as predicted, growth in the US and European dramas stabilising.  And three domestic pressures that remain on target band; unemployment, inflation and growth.  For future exchange moves there is going to have to be significant moves in those 6 factors to force the RBA's hand.