On a quiet and listless night of trade marked by mild risk aversion, the Aussie has managed to hold its ground quite well trading just above its New York close while euro and pound have slipped slightly in early European trade. With little economic data on the calendar the FX markets continue to digest yesterday’s news of a another bailout deal for Greece as well as keep an eye on US Fiscal Cliff negotiations. The Aussie appears to be receiving the benefit of safe haven flows as the political situation on both sides of the Atlantic remains murky.

In economic news Australian construction data for Q3 showed an improvement in activity rising by 1.7% but was lower than the forecast expectations of 2.4% Still this was a marked jump from quarter prior when construction expanded only at 0.9% rate and shows that the sector remains relatively healthy which may prompt the RBA to hold rates steady at its next meeting on December 3. Markets are divided about chances of another rate cut and if the RBA remains steady, the Aussie will likely continue to outperform as investors chase yield in a near zero interest rate G-20 world.

For the being the Aussie remains an oasis of calm amidst political turbulence in Europe and US as policy makers in both places attempt to deal with intractable budget policy issues. Yesterday’s comments by Senate leader Harry Reid sent risk tumbling after he expressed disappointment at the slow pace of progress in the budget talks. If US lawmakers continue to remain at a stalemate the risk aversion flows will likely accelerate and even Aussie will not be able to hold its bid as the day proceeds.

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