In the absence of the usual flurry of major economic releases overnight, currency markets were governed by price action in global equities. European equity markets kick off the proceedings with some mild strength on the back of positive company earnings, keeping the Euro in a reasonably tight range against major counterparts. Short term weakness was seen on the Euro in the minutes after the GFK Consumer Sentiment index was released, which showed consumer confidence in Germany declined 0.2 percent to a level of 4 percent in October, against expectation 4.5 percent rise. Euro was range bound until the dollar strength kicked in which pulled to Euro down two big figures to the current levels US$1.4870.

After an early rally in the US Markets, things quickly turned sour as the market reacted to news that the tax credit for first home buyers may face a gradual reduction in the event of an extension past the 30th of November expiry. With the market obviously expecting a greater concession past the expiry of the home buyer's credit, stocks turned pair, dollar headed north and commodities lost ground. Gold became the sellers target falling to 2 week lows of below US$1040 an ounce which coincided with the Aussies dollar's retreat through the US$.92's overnight to lows of US$.9125. At the time of writing the Aussie dollar is trading at levels of US$.9170.

In recent days the Aussie has struggled to continue the momentum we have become accustomed to. Yesterday saw Aussie weakness on the back of Producer Price Index (Q3) which came in below consensus recording a rise of 0.1 percent, representing an increase of 0.2 percent for the year.  In another Asian session light on economic data, we expect guidance to be drawn from equity markets until key releases from states tonight, namely consumer confidence figures for October which is expected to show a rise to 53.5 pts from the previous 53.1.