The US dollar weakened against most major currencies following Bernanke’s announcement that  interest rates will likely remain near zero until late 2014. However, the global slowdown has taken its toll on the Australian export sector, and the aussie may run out of steam as a result.

The markets may have bid farewell to 2011, but the European debt crisis hasn’t gone anywhere far, and continues to weighs heavily on risk currencies such as the Australian dollar.  EUR/USD ended the year 400 pips lower, and if investors continue to flock to the US dollar for safety, the aussie could weaken.

In the US, Chicago Purchasing Managers’ Index (PMI); monthly managers in Chicago survey to value the business conditions for employment, new orders etc. is due to reduce down to 59.2 points from 60.4 points.

The moderate rise in prices leaves room for a rate cut that will weaken the Aussie. On the other hand, the fresh signs of strength from China helped the Australian dollar. We have more data from China alongside Australian data.

More signs of slowdown in China and the double downgrade for New Zealand weighed on the Aussie. As risk aversion eventually took over, the Aussie, which is considered a risk currency, dropped as well.Apart from the rate decision, housing figures will be of interest this week.

The assumption about no new QE in the US hurt the Aussie, but when markets changed their mind, things turned for the better in AUD/USD. The Australian dollar got a boost from a better-than-expected number in China – HSBC’s PMI came out better than expected. We’ll now get the official release.

The main drivers of the Australian dollar were fresh quarterly inflation figures. Rising prices mean that rates hikes could come much sooner than expected. Will it be as early as now?

The end of QE2 in the US and the playing down of QE3 took their toll on the Aussie. Money printing in the US sure helped the Australian dollar. Also the intensifying Greek crisis is hurting it.

The stabilization of commodity prices and the weakness of the US economy, as reflected in slow growth and rising unemployment, helped push the Aussie higher. Now the Aussie depends more on the Australian economy.

Not only did the Aussie enjoy the weakness of the greenback after Bernanke’s QE2 Lite announcement, but it also rocked on strong Australian data. Quarterly CPI rose by 1.6%, stronger than expected. The RBA will probably need to move on the rates sooner than later. Will it happen now? Let’s start.