Australia: The AUD has taken a dive overnight following announcements from credit rating agency Standard and Poors in relation to their credit ratings for both Portugal and Greece.

The moves were seen as significant as it may be a sign the EU debt crisis is spreading.

The downgrade of Portugal's credit rating from A+ to A- spooked the markets as it was a more aggressive move than that which had been expected.

Greece's debt downgrade from BB+ to BBB+ only served to add to the concern. There are now fears that Spain will be the next country to come under pressure.

As has been the case of late in times of market uncertainty, the higher yielding currencies are the first to be sold off as investors retreat to the safe-haven currencies such as the USD and JPY.

Expect the AUD to continue to face selling pressure should the EU debt issues remain in the headlines.

Preventing the AUD from slipping too far to the downside is the ongoing speculation in relation to the local interest rate outlook.

Today's release of Local CPI data for Q1 may provide the market with some clarity in relation to the potential timing of the RBA's next move.

Majors: Financial markets took a big hit on the release of the S&P credit rating downgrades.

In the US the DJIA was down by 1.9% while the S&P500 lost 2.3%. European equity markets fared even worse with the German DAX down by 2.7% and the UK FTSE down by 2.6%.

Commodity markets were also affected with the CRB index falling by 1.9%. Spot gold was higher by 1.2% due to it's safe haven status, but other metal prices dropped significantly, with aluminum down by 7.2% and nickel down by 4.5%.

The EUR suffered its biggest fall against the USD since June 2009, falling back through USD1.3200. Further EUR falls are expected as the EU debt crisis worsens.

GBP/USD is also lower as a result of the uncertainty surrounding next week's general election.

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