Australian Dollar Finds it Feet as Fed?s Evans Throws Support Behind Further Stimulus

Despite notable strength across high-beta currencies including the Aussie and Kiwi, it's abundantly clear any short-term positivity can quickly be overshadowed by continued negativity from the Euro region with markets trading on the premise of action by global leaders, rather than any concrete initiatives. With Greece's elections looming and the finer points of Spain's bailout terms left unanswered, the post-bailout rally has been marred by anxiety over the potential contagion effects for other debt ridden nations with Italy the next in the firing line.  Although the bailout will be engineered to rescue ailing Spanish banks, the intrinsic link between banks and the sovereign itself remains of primary concern with fears of an imminent spill-over. Spanish borrowing costs continuing to rise overnight night with yields forging new Euro-era highs of 6.83 percent. A day after downgrading two of Spain's largest banks Santander and BBVA, ratings agency Fitch followed through with a further downgrade of 18 Spanish banks overnight citing distressed loan exposures to construction and real-estate markets.

Given the headline sensitive environment, we consider any strength across the risk spectrum to be tentative at best. There's a lot of murky water left pass under the bridge and without closure to Greece's political drama's a material and sustained shift in sentiment is unlikely. This morning the local focus will turn to RBA Governor Glenn Stevens who will speak at the Prime Minister's Economic Forum in Brisbane followed by the Westpac consumer confidence index at 11.30am. Local factors aside, it's clear the local unit remains at the mercy of broader European and U.S markets with parity likely to act as firm resistance ahead of impending elections in Greece. At the time of writing the Australian dollar is buying 99.5 US cents.