Identifying trends in the currency markets has been extremely difficult in recent times - from a Euro which is defying logic by notching up solid gains against major counterparts amid a never ending bout of economic illness, to a US dollar that is seemingly lost in a maze of mixed economic signals.

The once 'rock solid' Aussie dollar hasn't also got away scot-free this year taking an over 3 percent fall from grace against the US dollar.

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Nevertheless, a new week has brought a new set of economic signpost with US poised to release a host of economic feedback with the FOMC meeting and 4Q GDP the primary risk events.

Although rates will remain at record lows between zero and 25 bps, the market mover is in the language that we see from the Fed - any positive deviation from the feds 'extremely low rates for an extended period' mantra and/or change to the fed's quantitative easing program may bring forward rate hike expectations, therefore the balance fall back in favor of the greenback.

Likewise a significant improvement in US growth on Friday could prove to be a shot in the arm for the US dollar as investors envisage the greater likely hood of the Fed halting further stimulus.

Locally, the week ahead for the local calendar will see investor attention focused on 4Q consumer price data which is likely to show headline inflation rose to 3.0 percent from a previous 2.8 percent. The RBA's preferred measure of inflation which discounts price pressures on the higher and lower end of the scale is also expected to make a mild rise from 2.5 to 2.6 percent in 4Q.

Considering the flood impact of Queensland would have little to no impact on 4Q inflation - short of a significant deviation from estimates we believe Tuesday's CPI to have less bearing on RBA's view on rates when they reconvene in February - however should we see a significant upward deviation from estimates, this will spell bad news for the RBA which will likely bring forward expectations of a rate hike.

Whilst it is true the immense cost the Australian economy will no doubt take a considerable chunk out of the near term growth - as the state of Queensland embarks on a cleanup of epic proportion, supply constraints and the stimulus induced rebuilding process will no doubt put considerable pressure on goods and services which will be the RBA's primary consideration going forward. At the time of writing the Aussie dollar is buying 98.9 US cents.

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