Australia: The Australian dollar has opened this morning close to USD0.8950 after a relatively quiet trading session overnight. Ongoing concerns over the debt situation in Europe continue to provide some solid resistance on the topside for the AUD, and as long as this situation persists, it is unlikely the AUD will make any solid gains. Today’s local employment data will be watched with some interest. Market expectations are for the number of employed to have increased by just over 22,000 and for the unemployment rate to remain unchanged at 5.3%. RBA Assistant Governor Lowe is also due to give a speech in Sydney today and markets will be looking for any hint as to what the RBA’s current thoughts are in relation to the outlook for the Australian economy. On the crosses, the AUD continues to track higher, particularly against the EUR. Expect further gains over coming days as the EUR continues to struggle to attract buyers.

Majors: Equity markets put in a solid performance overnight with the DJIA up 1.4% and the DJ Euro Stoxx 50 up by 1.2%. Announcements from both Spain and the UK on measures they intend to take to cut their huge deficits provided some encouragement for the market. The new coalition government in the UK announced spending cuts of close to GBP6bio and indicated that a number of taxes would be increasing. The BoE Governor, Mervyn King, was also commenting on the BoE’s outlook for the UK economy, in which he stressed the need for deep deficit cuts. It is largely expected that official interest rates in the UK will be on hold for at least the rest of this year. As with the EUR, the GBP is also likely to encounter some strong headwinds over the short to medium term.

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