Australia: The AUD has opened this morning fairly unchanged despite falling through the USD0.8700 level last night. The continuing concerns regarding Europe’s debt crisis just don’t seem to go away and influenced the markets early on during the offshore session before somewhat stabilizing. US equity markets were down by more than 2% at one stage during the session but recovered with the DOW posting a small gain of 0.05%. Commodity prices were down as investors feared that the sovereign debt crisis would spread further affecting the global economic recovery and decreasing the demand. Downward pressure on the AUD is likely to continue as global risk appetite is decreased due to the continuing fears about a global economic recovery. Also likely to have an affect on the AUD today is the release of the Reserve Bank of Australia’s minutes from their May board meeting. The central bank lifted the official cash rate by 25bps to 4.5%, but comments that followed the announcement said that the mortgage rates for most were back to normal levels. This indicated to most that it’s likely the RBA will sit back and see how the sixth rate rise since October 2009 affects the economy and how the sovereign debt crisis in Europe will play out.

Majors: Overnight saw the following data releases out of the US; the US Empire State Manufacturing Survey for May as well as the Foreign Net Transactions for March. The manufacturing index declined to 19.1 compared to expectations of a small decrease to 30. This indicates that the manufacturing activity is moving towards are more sustainable level of growth. The Foreign Net transactions doubled in Mar to $140.5bio as global demand for US financial assets strengthened. As mentioned above the continuing concerns in Europe are also affecting the EUR with it hitting a 4-year low yesterday, but opening higher this morning at USD1.2390. Since the beginning of this month, the EUR has dropped a staggering 7% and it could continue to fall should the debt concerns not be resolved. The GBP has also fallen, hitting a 13-month low against the USD as fears that the new Conservative-Liberal Democrat government will reveal their fiscal problems are worse than first thought. Also weighing on the sterling was a UK report which showed house prices in the region fell for the first time in 2010.

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