The optimism seen in recent seasons waned overnight as investors considered less than convincing economic reports from the US and the FOMC minutes showed a somewhat bearish take on the state of play in the US.

The Fed minutes showed the board would need to consider “whether further policy stimulus might become appropriate if the outlook were to worsen appreciably,” and modestly downgraded economic growth estimates for 2010. The meeting in which the Federal Reserve kept interest rates at record lows, once again reaffirmed its pledge to keep interest rates at record lows for an “extended period.” The minutes stated “The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside.”

US retail sales failed to meet estimates falling 0.5 percent in June against a previous decline of 1.1 percent. Analysts had expected a more subdued decline of 0.2 percent. Import price index also failed to provide any upside for the greenback, with the key cost gauge of importing goods falling 1.3 percent in June against the expected decline of 0.3 percent. Key US index the DOW managed to scrape over the line in the black – the broader S&P index finished .02 percent in the red.

This did little for the appeal of the Greenback which continued to post losses against major counterparts. Sterling continued an upward trajectory rising to 10 week highs of US$1.53 against the greenback. Economic data from the UK overnight showed the economy cut 20,800 jobs in the month of June – in line with economists’ estimates. The official unemployment rate edged lower from 7.9 to 7.8 percent. At the time of writing sterling is buying US$1.5265.

Locally, the Aussie dollar has managed to stay buoyant above the 88 US cents levels overnight. Looking ahead, the local unit is at the mercy of key economic data from China in today’s session which should prove to be a major market mover for both local equities and Aussie dollar. Chinese GDP to be released today is expected to show the Chinese economic growth slowed to 10.5 percent from a previous 11.9 percent. Any significant deviation above estimates will likely induce another round of speculation China will take further steps to cool the economy, which is likely to weigh on commodity markets and the Aussie dollar. A lower than expected result may also raise question marks over China’s ability to maintain the high levels of growth many advanced economies are banking on. At the time of writing the Aussie is buying 88.2 US Cents.