Australian business confidence slumped in November sending Aussie lower in Asian session trade but the currency rebounded in early European dealing as better risk flows and brought it back to even. Business confidence in Australia sank to a three year low printing at -5 for the second month in a row while the index reading collapsed to -9 from -1 the month prior.

The news suggests serious pessimism amongst the 600 firms surveyed and puts into question the relatively sanguine assumptions of the RBA regarding growth in 2013. Up to now the most recent Australian economic data has been uneven with Retail Sales weaker than forecast but employment holding up. However, the sharp decline in business confidence may signaling a deeper decline in aggregate demand that may force the RBA to lower benchmark rates once again at the start of 2013.

The Aussie dropped to a low of 1.0460 in early Asian session trade, but bids ahead of the 1.0450 barrier helped to support the pair and it traded back to opening ranges by the time of European open. The Aussie remains in a very tight 1.0450-1.0500 range, with slight upward bias as investors continue to hope for an improved global outlook for growth, looking for a stabilization in Europe and resolution of Fiscal Cliff issues in the United States. In the meantime the pair is likely to tread water as it takes its cue from equities which are likely to remain subdued ahead of Wednesday’s FOMC meeting.