Global traders took the path of least resistance on Friday amid escalating civil unrest in Egypt. The premise of further political turmoil from Egypt found investors seeking the perceived safety of the greenback with price action of US treasuries also showing evidence of safe haven buying. US stocks bore the brunt of fears the unrest in Egypt will intensify with the S&P500 losing 1.8 percent on the day. The US dollar index which measures the value of the greenback against six major counterparts rose 0.5% to 78.15 predominantly made up of strength against the Euro and Sterling.

The major beneficiary of the latest bout of risk aversion was also the Japanese Yen which has recorded strong gains against major counterparts. This comes a day after ratings agency Standard & Poor's downgraded the Japanese debt which subsequently saw the Yen lose major ground. Concerns of increasingly high debt levels, albeit mostly from private domestic investors in what is seen to be an ageing population saw S&P cut the nation's debt rating to AA- from AA.

Much of the focus on Friday was also the release US Gross domestic product. Initial estimates showed the US economy grew at an annual pace of 3.2 percent in the 4Q against a previous 2.6 percent. Although undershooting economist's consensus of 3.5 percent growth, the reaction was largely positive from which market participants perceived as yet another sign the US recovery has well and truly set in. We also saw more evidence the US is regaining economic composure with personal consumption data showing growth of 4.4 percent in the fourth quarter, surpassing previous growth of 2.4 percent and expectations of 4 percent.

Meanwhile, the Aussie dollar ended the week on a neutral to higher note against the greenback after a reactive week of trading. Earlier in the week local CPI data fell short of estimates resulting in short term weakness of the Aussie, but over the course of the week the local unit has remained fairly resilient spending the majority of time above 99 US cents.

It's a particularly important week from a local perspective with the first Reserve Bank set to reconvene for the first time in 2011. Although it is clear there is little evidence to suggest we will see interest rates increase in the first half of the year, investors will be eagerly awaiting the RBA's take on the flood disaster in Queensland and the economic impact thereof. 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. Another part to the equation which could act in favor of a longer term reprieve from the RBA is Prime Minister Gillard's tax levy which could be perceived as a potential neutraliser to longer term inflationary pressures. If we should see the RBA signal a neutral stance for an extended period, this will no doubt manifest in Aussie dollar price action. At the time of writing the local unit is buying 98.9 US cents.