Australia: The Australian Dollar has continued to push higher overnight following a positive lead from equity markets. Investors sought high yielding assets again, as Europe’s sovereign debt crisis, whilst regarded as a serious issue, which it clearly is, was placed in perspective alongside signs the global recovery is potentially taking shape. Base metals posted gains with copper rising 0.3% to US$6,680 while zinc, aluminium and lead rose 2.4%, 0.9% and 2.6% respectively. Locally, the RBA Deputy Governor Ric Battellino’s speech yesterday stated Australia did not suffer from a housing bubble, and importantly, Australian banks have demonstrated a sound and effective ability to manage their risks associated with off-shore funding. Yesterday also saw the release of the RBA June Board Minutes, which noted the Board felt that the Bank’s tightening in monetary policy provides flexibility as events unfold offshore and all eyes view the inflation issue. The next CPI release is in July and the market feels the Board will see this result and take this into account before any “real” decision on interest rates. Today sees the release of the Australian WMI Leading Index for April along with the Dwelling Starts for Q1 and the market expects the AUD to remain well supported.

Majors: US Equity markets rallied overnight with the Dow up 2.1%, the S&P 500 up 2.3%, and the Nasdaq up 2.8%. European equity markets started the offshore session positively following news that News Corp had made an offer to buy British Sky Broadcasting. US Data included the Empire Manufacturing Index for June, which rose to 19.6 from 19.1, while the US NAHB Housing Market index for June fell to 17 from 22. The fall in the housing index reflects the end of the home buys tax credit of up to $8,000 so not much to read into that. Back to Europe, the downgrade of Greece by Moodys has been digested it seems, by investors, despite the rise in sovereign debt insurances costs for Greece. On a positive note, Spain managed to raise EUR 5bn in a bond auction, thus reaching the target set by the Spanish issuing authority. The bank of Japan release their monthly report today, the Euro Zone’s CPI is due and the UK’s unemployment figures for April will be released.

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