AS anticipated the European Central Bank held benchmark interest rates steady at 1.0 percent overnight. Recent weeks have seen a sharp upward trajectory from the Euro as central bankers signaled a willingness to raise interest rates should inflationary pressures remain firm. However overnight ECB president Jean Claude Trichet attempted to dampen conjecture over a near-term rate hike suggesting the recent spike in consumer prices is short-term with inflationary pressures over the medium to long term should remain contained.

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The ensuing period saw a sharp reversal from the Euro against major counterparts losing over 1.0 percent against the greenback to lows of US$1.3609 - at the time of writing we're seeing the Euro find mild support above these levels however there is little question it remains on the back foot without the premise of a near-term rate hike to keep any selling contained.

The US dollar was markedly stronger overnight against major counterparts overnight with the dollar index which measures the value of the greenback compared to that of 6 major counterparts currently trading 0.85 percent higher at 77.74. In a speech at the National Press Club, US Fed Chairman Ben Bernanke painted a somewhat positive economic outlook but remains cautious on employment front which is seen as the last bastion of the economic recovery with the Chairman stating Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.

width=272It was also a solid night on the economic front, with weekly jobless claims, factory orders and the ISM Services index all exceeding economist's estimates. US stocks we're able to finish in the black despite wavering earlier in the session as participants remain nervous ahead of tonight's non-farm payroll data.

In contrast, the local unit didn't cohere to this uniform of US dollar strength which outperformed its major counterparts including its commodity peers the CAD and Kiwi. The Aussie rose to fresh one month highs against its US namesake and is looking in decidedly better shape against the Euro which has gained the upper hand against the Aussie in recent weeks. The appeal of the Aussie was maintained overnight supported by strength in metals which saw copper hit $10000 a tonne on for the first time with strength from gold and silver prices underpinning Aussie strength. At the time of writing the local unit is buying 101.5 US cents with price action likely to take direction from the RBA's quarterly monetary policy statement to be released today at 11.30am AEDST.