Commodity prices weaken the Aussie dollar
The US stockmarket weakened on Friday night, hit by risk aversion. The Dow fell 1.8%, the S&P 500 was down 1.9% (to a two-month low) and the Nasdaq lost 2.2% for the session.
This followed losses in European markets and suggests the Australian stockmarket will also open weaker this morning.
US government bond yields fell sharply, particularly at the long end.
This reflected solid demand for government bonds on safe haven flows and as oil prices declined, diminishing expectations for inflation (which erodes the return on bonds).
The move came despite the Fed's meeting this week, where it is expected to raise interest rates.
Australian government bond yields (implied by futures) fell on Friday night, tracking the move in US government bonds.
The US dollar index (weighted against a basket of currencies) fell on Friday night amid nervousness ahead of the Fed meeting this week.
The Euro and the Yen gained against the broadly weaker US dollar. EUR/USD was trading at 1.0943 on Friday morning and is trading around 1.0979 this morning.
Sterling recovered from weakness in the previous session, to reach a three-week high against the US dollar. GBP/USD rose from 1.5159 on Friday morning, to currently trade at 1.5221.
The Aussie dollar defied the trend, falling against the US dollar on Friday on weaker commodity prices and heightened risk aversion.
AUD/USD fell from a high of 0.7283 on Friday morning, to a low of 0.7184. The Aussie, however, gained a little ground this morning following the release of upbeat Chinese economic data on the weekend.
The Aussie dollar was weaker against the other major currencies. AUD/NZD continued its decline, falling from 1.0802 on Friday morning, to a six-week low of 1.0695 early Saturday morning.
The oil price fell further to US$35.60 per barrel on concerns about a global oversupply.
There was no local data to report from Friday.
Industrial production was stronger than expected, rising 6.2% in the year to November, up from an increase of 5.6% in the year to October.
Retail sales were also better than consensus expectations, rising 11.2% in the year to November, up from 11.0% in the year to October.
German CPI inflation rose 0.1% in November and by 0.4% in the year to November, maintaining the annual pace from October.
Consumer sentiment slipped in New Zealand during December following three months of increasing optimism. The ANZ Roy Morgan index fell from a six month high of 122.7 in November to 118.7 in December and in line with its historical average.
Construction output was softer than expected, rising by 0.2% in October. For the year to October, construction output rose by 1.0%, up from a decline of 0.3% in the year to September.
Retail sales rose 0.2% in November, disappointing consensus expectations for a 0.3% increase. Core retail sales, however, were stronger than expected, rising 0.5% in November.
Gasoline price declines accounted for much of the difference between the two measures.
Producer prices rose 0.3% in November. For the year to November, producer prices are down 1.1%.
Consumer sentiment rose to 91.8 in December, according to the University of Michigan measure. This was up from a reading of 91.3 in November, although it was below consensus expectations.