Australia: The Australian Dollar has opened higher this morning above 0.8500 and this is pretty much on the back of yesterday's no change in Australia's Official Cash rate and the release of the Australian Trade Balance data for May.

The result was nothing short of stunning.

A surplus of A$1.645Bn was significantly higher than the expected A$500m the market had been forecasting and the A$1.123Bn surplus in April.

The contribution of oil and iron ore was very real, are there for all to see. Coal made up 17.7% of the nation's exports in the month, while iron ore and other concentrates made up 18.6%. All other major commodities made single digit contributions.

Despite the strong figures, currency and equity markets did not react that much at the time with the AUD holding at 0.8435. This data explains the Reserve Bank's strong outlook on the Australian economy, and the market will look with keenness to the June trade figures on August 4.

The RBA announcement saw the Board leave rates unchanged at 4.5%, and comments in the accompanying statement noted they expect inflation to be above the target band for the near term though the market is pricing the RBA to remain on hold next month.

Q2 CPI results due for release in late July are key, and should they be on the high side, an interest rate rise may firm in the stakes in August.

The RBA statement also mentioned that global economy has continued to expand over the recent months, while there has been some caution in financial markets mainly driven by European sovereign/ bank concerns.

We feel the AUD will remain supported above the 0.8460 level today following on from the offshore gains.

Majors: US equity markets posted gains across the board overnight with the Dow breaking its 8 day losing run to finish up 0.6%, while S&P up 0.5% and the Nasdaq up 0.1%.

European markets finished stronger with the FTSE up 2.9% the DAX up 2.2% and the CAC up 2.7% European banks reported they will pass the bank stress tests and this saw equity markets rally strongly in Europe.

Base metals were firmer overnight with copper up 2.1%, nickel up 1.2% and aluminium up 3.0%.

Data released overnight was the US ISM non-manufacturing data for June which reported a reading of 53.8 from 55.4 slightly below the consensus of 55.0.

Australia