Global central banks commanded the stage overnight with China, Euro-Zone and the United Kingdom embarking on new policy easing measures in an effort to spur economic growth. As widely anticipated, the Bank of England held the official cash rate steady at 0.5 percent overnight while voting to step-up asset purchases by £50 billion, bringing the total value to £375 billion. The central bank affectionately known as the old lady of Threadneedle Street has been afforded the necessary breathing space to embark on further quantitative easing measures given the marked decline in inflation amid subdued growth. Further insight into the decision will be available upon the release of the policy meeting minutes on July 18.

Across the Channel, the European Central Bank cut its main refinancing rate by 25 bps to 0.75 percent. The bank also cut the rate it pays for deposits by 25 bps to Zero in an effort to encourage bank-to-bank lending and dissuade banks from side-lining capital. In a post decision press conference, ECB President Mario Draghi highlighted growth risks in the region noting We see now weakening of growth in the whole of the euro area including countries that had not experienced that before. Draghi offered no indication this latest effort would mark the start of a series of policy easing initiatives, including a third Long term refinancing operation.

Earlier, German factory orders outpaced expectations rising 0.6 percent in May from a previous fall of 1.4 percent (Revised from -1.9 percent). In the previous 12-months factory orders slid 5.4 percent, slightly better than the estimated decline of 6.0 percent. A sale of Spanish debt was met with sufficient demand with the maximum target of €3 billion reached at yields slightly higher but comparable to previous auctions of the same maturity. Nevertheless the appeal of peripheral debt suffered over the course of the session with Spanish yields rising 36 bps to 6.7 percent.

Meanwhile, the health of U.S employment remained a primary theme overnight with stronger than expected private sector employment data a positive pre-curser ahead of Friday's official government report. The ADP employment gauge outpaced expectations showing 176,000 new private sector jobs in June, above and beyond the 100,000 expected. Weekly jobless claims also beat expectations with 374,000 U.S citizens applying for unemployment benefits for the week ending June 30 from previous claims of 388,000. Softer than expected ISM non-manufacturing index offset the better than expected jobs data and U.S markets failed to finish in the black with both the DOW and S&P moderately lower on the day.

After showing signs of stabilizing in recent sessions, the Euro resumed a strong south-bound course with the EURUSD pair falling to lows of 1.2363 with solid losses also seen against its risk counterparts. Steps by China to rejuvenate growth by fine tuning policy have provided a positive backdrop for the Aussie dollar which recorded strong gains against its major counterparts, lead by gains against the Euro and Swiss franc.

The Peoples Bank of China has cut interest rates for the second time in a month, reducing the savings rates by 25bps to 3.0 percent and the 1-yr lending rate by 31 bps to 6.0 percent. After successfully engineering a campaign to promote more sustainable levels of growth and inflation, the central bank is expected to continue fine-tuning policy in response to recent economic signposts suggesting a decline in economic growth.  

Australian's travelling to the European region have reason to cheer with EUR/AUD pair falling to the lowest level since the Euro's inception. The EUR/AUD pair sliced through points of previous support to hit a euro-era low of A$1.2021 with the pair remaining under ample pressure at current levels of 1.2045. In addition to the supportive nature of China's interest rate cut, diverging interest rate yields for Europe is also conducive to a stronger Aussie dollar. The local unit rose to fresh 2-month highs of 103.29 US cents overnight despite moderate weakness from U.S equities - we anticipate the overnight high will act as resistance during domestic trade.

The day ahead will see the release of the AIG Performance of Construction Index, foreign exchange reserves and leading index from Japan. With no top-tier data due for release we anticipate regional equity performance will continue govern sentiment ahead of tonight's U.S employment numbers.

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