Dollar weakness persisted in overnight trade with the balance of risk in favour of higher yielding currencies, stocks and commodities. US Retail Sales for October also posted solid results with an increase of 1.4 percent from the previous month, well above the consensus of a 0.9 percent rise. Gold continued to surge hitting all time highs of US$1,143.00 an ounce and the DOW bounced 137pts to a level of 10,407. Federal Reserve bank Governor Ben Bernanke didn't exactly share the same level of enthusiasm evident in market activity, painting a rather cautious view of the US recovery, however did note economic conditions have vastly improved from a year earlier. Speaking in New York he reiterated Interest rates will likely remain exceptionally low for an extended period, and warned the implications of high unemployment will likely prevent the expansion from being as robust as we would hope.
The US dollar index which measures the dollar's value relative to six major foreign currencies continued to retreat, trading down to the levels of 74.68 before rebounding slightly to 74.9 representing a loss of 0.32 percent on the day.
Meanwhile, the Aussie dollar became a beneficiary of the latest burst of optimism trading above 94 US-Cents overnight for the first time since August 2008. The much anticipated RBA minutes will be the prime mover for the Aussie dollar today with the direction highly contingent to the finer points of the communiqué - we expect the tone to read similar to past meetings with the bank officials continuing to paint a bullish view of the Australian economy into 2010. In recent times Reserve Bank Governor Glenn Steven's has painted a very clear picture of the RBA's stance on monetary policy stating The period of greatest weakness in the Australian economy is probably past. Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010.
However, to throw into the mix we also need to take into account the recent mixed bag of economic indicators since the RBA decided to raise interest rates this month. Recent economic releases such as the Westpac Consumer confidence index suggest confidence has taken a hit with the index declining 2.5% in November against a rise of 1.7 percent in October. The lull in confidence has been attributed to the latest interest rate hikes; with subsequent interest hikes expected also taking its toll on consumer confidence going forward. In contrast recent labour data has fuelled speculation another hike is on the cards with October employment data showing the Australian work force has increased by 20,100 for the month of October, against the predicted decline of 10,100. This latest Jobs data increases the likely hood of the RBA following through with a third consecutive interest rate hike in December's meeting.