As Greece's debt woes continue to plague global markets, currency markets remain in disarray evident in latest night's activity which saw the Euro drop to lows of US$1.3450. The latest bout of risk aversion comes courtesy of rating agencies Moody's and Standard & Poor's which have both threatened to cut Greece's rating if the country fails to take the stringent measures needed to curb the budget deficit. This spooked global equity markets inducing risk sensitive currency punters to the safety of the greenback and Yen earlier in the session. Less than convincing economic feedback from the States also weighed on investor confidence with Jobless claims for the week ending Jan 20 rising to 496,000 from the previous week's 474,000. Analysts had expected a decline to 466,000 new claims for unemployment benefits. We did see some concession however, with US Durable goods orders surpassing expectations to record 3 percent growth in January from a previous upward revision of 1.9 percent. Economists had expected a more subdued rise of 1.5 percent. Durable Goods excluding transportation showed a surprise 0.6 percent contraction in January against the expected 1 percent growth.
Fed Chairman Bernanke expressed his concern on what the nations deficit will impact on the US Dollar in his second day testimony to the house of House Financial Services Committee - Wednesday saw US stocks buoyed as Bernanke reaffirmed the Fed's pledge to keep interest rates on hold in the foreseeable future. Bernanke also maintained that the countries unemployment woes are likely to keep a lid on inflationary pressures. At the close of business US stocks were able to pair some losses however still remained in the red with the DOW finishing down 53 pts on the day.
Locally, the Aussie dollar has been able to recoup losses, after following stocks and commodities on a downward trajectory overnight, falling to lows of 88 US cents. At the time of writing the Aussie is buying 88.8 US cents well off yesterday's 9am AEDT open of 89.5 US cents. We expect the interest rate conjecture to heighten ahead of Tuesday's RBA meeting which could have some sway over Aussie dollar movements in the lead up.