A renewed sense of optimism forced the greenback to decline against major counterparts overnight, with a rally on European stock markets setting the tone early on in the session. European stocks found strength on the back of stronger commodity markets, namely Crude oil which surged to year highs of US$79.68 overnight.
The Euro resumed its ascent against the Dollar rising to highs of US$1.4967. At the time of writing the Euro is trading at US$1.4960 which has been key resistance for the last three trading days with traders seemingly hesitant to push it back through the illusive US$1.5000 levels.
It would take a brave trader to short the pound at the moment, given its recent momentum against the Dollar. The UK currency was given a leg up last week as speculation grew the Bank of England may suspend the quantitative easing program and has since continued the onslaught rising close to one month highs of US$1.6435 in overnight trade.
US stocks extended the rally, as investors predicated a better than expected earnings season, adding further pressure to the greenback. The Dow pushed above the psychological level of 10,000 once again reflecting an increase investor appetite for risk. The same sentiment pushed commodities with the Aussie dollar the natural beneficiary which broke US$.9200 overnight and now flirting with US$.9300.
We expect the Aussie to remain well supported surrounding the release of the RBA minutes for the October meeting, which is likely to echo the hawkish comments made by Governor Stevens recently in relation to the local economy into 2010.