The central bank surprised the markets last week by maintaining interest rates at 4.25%. The markets had predicted a 0.25% cut, which would have likely pushed the aussie downwards.

In the US, CB Consumer Confidence increased more than predicted to 64.5 in December from 55.2 in November indicating an elevated confidence among households. A further improvement to 68.2 is expected now.

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.

After a sluggish 2011, the Australian economy is expected to post a respectable growth rate of  4 per cent in 2012. The news from down under is not all good however, as the debt crisis in Europe will wipe out $20 billion from expected revenue over the next four years. The outlook for the Aussie is cautiously positive, as there is renewed hope that European leaders will act forcefully to get the debt crisis under control.

In the US, Charles Plosser, Federal Reserve Bank of Philadelphia President, is about to lecture in Philadelphia

Glenn Stevens acknowledged the global slowdown and easing inflation and cut the interest rate to 4.50%. This weighed heavily on the pair, as well as no new hints on QE3 in the US.

The Australian dollar fell to a one year month low against the greenback on global worries and some hints of a rate cut in the monthly rate decision. On the other hand, retail sales, building approvals and trade balance all provided upside surprises.

In the US, Federal Budget Balance, monthly report to value the deference between the income and spending of the federal government’s, this month a deficit is predicted from -129.4B on the last month to -126.5B this time.

The Aussie enjoyed an excellent GDP report: the economy in Australia grew by 1.2% in Q2, on top of a smaller drop in Q1, which was revised to the upside. On the other hand, employment data was very disappointing in August: a drop in jobs and a rise in the unemployment rate weighed on the Australian dollar.

Update Monday, 22:30 GMT: Fears are extreme in the markets and is surrendering to the US dollar. AUD/USD Parity is in sight