DAILY CURRENCY OUTLOOK

* Aussie opens virtually unchanged as US Fed hike

* US Federal Reserve increased interest rates by 0.5% as expected

* Local employment nos. due out this morning

As expected, the US Federal Reserve delivered a 0.5% interest rate rise early this morning. The delivery of the 50-basis point hike, which broke a trend of 4 consecutive 75bps hikes since June, was made easier by softer than expected US inflation numbers for November released yesterday. Headline CPI for the 12 months to November came in at 7.1% against 7.3% expected, and Core Inflation (the preferred gauge for Central Banks) which excludes the volatile food and energy components, recorded 6.0% versus 6.1% expected. Following the release, the greenback was heavily sold against most currencies – the Aussie quickly climbing from 0.6780 to 0.6890 but has drifted lower since. Markets not only priced in this morning’s 50bps hike but are now pricing that a smaller hike of 25bps may occur as early as February when the Fed next meets.

Today and tonight continue a busy 2-3 days. Australian job numbers are due at 11:30 am, and if, as expected, the unemployment rate falls to 3.3%, this will be a new 48-year low. The Central Banks of Switzerland, the UK and Europe are all expected to increase interest rates which could continue to add further downward pressure on the USD.