Tuesday 15th January

The USD came under further selling pressure yesterday but has managed to hold its ground overnight. Against the Yen the dollar edged towards a 7 week low on concern that weak US bank earnings (due for release in the next few days) will push the US economy closer to recession thus fuelling expectations of further interest rate cuts by the Fed.

The Aussie has hit a fresh 2 month high against the USD helped by a widening yield advantage as expectations grow that Australian interest rates will rise as early as next month on strong domestic data.

Futures markets are now reflecting a 50/50 chance the Fed will cut rates by 75bp between now and its Jan 29/30th meeting. Focus today will be on retail sales and inflation data from the US with any weakness in retails sales being viewed as further negative for the USD. Model running well but keep the 'money management' discipline.