THE Australian Dollar weakened last week, trading on Tuesday at 1.5437 to the British Pound, and around 0.9589 against the US Dollar as the Reserve Bank of Australia (RBA) cut the cash rate. Thursday afternoon saw the Aussie regain some ground to 1.529 and 0.9508 respectively as Eurozone economic data forecasted a gloomy future. Friday’s trading session closed with the Aussie around 1.526 and 0.9525 respectively, as the market prepared for this week’s Federal Open Market Committee’s meeting in the US. The RBA has cut the Australian cash rate by 175 basis points since November 2011 to a record matching low of 3 percent, last seen in April 2009 during the depths of the financial crisis. The latest announcement on Tuesday was a 25 basis point cut. The RBA will not meet in January 2013, which leaves a lot of room for change and speculation on market trends between now and early February. European Central Bank (ECB) President Mario Draghi announced on Thursday that the ECB interest rate will remain unchanged at 0.75 percent. This coupled with the lowered forecast for inflation and growth expectations in the region weakened the Euro against its major trading partners, as well as the Aussie Dollar. Eyes will be on Italy as they prepare for elections early in the New Year. Thursday saw Silvio Berlusconi’s PDL party walk out of a Senate confidence vote which is likely to cause uncertainty in the markets. The Italian Prime Minister Mario Monti has subsequently told the head of state that he intends to resign due to the loss of support in parliament. Monday morning’s trading session didn’t show strong signs of recovery as Chinese trade data underperformed and disappointed the market. China saw a rise in exports while keeping imports unchanged. This questions the sustainability of the world’s second largest economy’s rebound growth. Australia is heavily dependent upon exporting goods to China and will hope to see improved importing trends in the coming months.

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