Australia: The Australian dollar fell back below USD0.9100 cents overnight as another round of risk aversion hit global financial markets. As has been the case of late, concerns still persist in relation to Greece and the debt crisis currently enveloping the EUR region. The AUD also has had some of its support eroded by the RBA rate announcement yesterday afternoon. Even though the RBA increased the official cash rate by the widely expected 25bp, the accompanying statement, in which the RBA said rates for most borrowers will be around average levels, suggests we now may see a pause in official interest rate increases over the coming months. Expect some buying interest to emerge today, which will likely prevent us seeing any further large falls during the local session, but depending on what evolves in the offshore session tonight, the AUD may be a chance to take a dip back below USD0.9000.
Majors: It seems that the relief felt over the recently announced EUR110bio rescue package for Greece was short lived, with markets going into freefall overnight amid fears the contagion is spreading to other EUR nations. At one stage there were rumours that Spain would be requesting a EUR280bio rescue package from the IMF. The Spanish premier, Jose-Luis Zapatero, later denied the rumour, dismissing the claim as absolute madness, but the damage had been done, and the Spanish stock market fell by 5.4%. Other northern hemisphere equity markets also recorded large losses with the Paris CAC down 3.6%, the London FTSE down 2.3% and the US S&P 500 down by 2.4%. In the currency markets, investors were once again retreating to the safe haven currencies, ie the USD and JPY. The EUR took a beating falling to its lowest level against the USD in over a year. The GBP also continues to fall due to the uncertainty surrounding the outcome of this week's election.