The dollar is weaker against the euro and Aussie as the US market returns from holiday, falling to its lowest level in 3-months versus the Aussie at 0.9236 and a 2-week low against the euro at 1.4756.

The NAHB housing market index unexpectedly rose to 20 in February, versus 19 a month earlier. Nonetheless, despite the improvement, the index remains mired near record lows. Traders will turn to US economic data slated for release on Wednesday, which include January CPI, building permits, real earnings, and housing starts. Consumer prices in January are largely unchanged, with monthly headline CPI at 0.3% from 0.4% and 4.2% versus 4.1% from the previous year. The core readings are seen at 0.2%, unchanged from a month prior and 2.4% y/y, also unchanged.

RBA Minutes Prop Aussie
The Aussie rallied to its highest level since November against the greenback at 0.9236 following the release of the minutes from the Reserve Bank of Australia's February meeting – in which the RBA hiked interest rates by 25-basis points to 7.0%. The minutes reinforced market sentiment for further policy tightening over the coming months and revealed consideration from Board members for a more aggressive 50-basis point hike in February. The rationale for a more aggressive move was deterioration in the inflation outlook and “the risk of inflation expectations becoming dislodged had increased”. The RBA added that “a significant further rise in the cash rate could be necessary” on the premise that “the current cash rate in real terms arguably was noticeably below what might be expected given the economy's circumstances”.

AUDUSD hovers around the 0.92-figure with interim resistance seen at 0.9240, backed by 0.9270 and 0.93. Subsequent ceilings are seen at 0.9330, followed by 0.9370 and 0.94. On the downside, support begins at 0.9160, backed by 0.9130 and 0.91. Additional floors will emerge at 0.9070, followed by 0.9030 and 0.90.

Sterling Sluggish

The sterling continues to suffer from yesterday's news that UK lender Northern Rock would be nationalized by the government. Despite the dollar slipping across the board, cable was unable to benefit given overall bearish sentiment plaguing the sterling.

UK reports for Wednesday will see the BoE minutes from the most recent meeting, in which the Bank cut rates by 25-basis points to 5.25%. Although the decision to ease rates is widely expected to have been unanimous, the possibility for dissenters voting for a more aggressive cut remains.