Australia: The Australian Dollar has opened over one US cent higher this morning and is trading above USD0.8800.

This follows a sell off late yesterday in our local session, which saw it trade south of the USD0.8700 level briefly.

Volatility remains ever present and the AUD is as tough to call as ever! Yesterday's sell off was caused by a fall in the iron ore price amidst fears of Chinese demand slowing further than expected, even from revised levels forecast not so long ago.

Last night investor sentiment turned positive as solid earnings reports in the US buoyed investor confidence for higher risk assets, such as equities, and commodity driven currencies.

Wall Street rallied overnight following a positive start to the second quarter reporting season, with Alcoa reporting earnings above market forecast for  the second quarter after the close of trade in New York yesterday.

The aluminium producer reported a net profit of US$136m in the June quarter, a turnaround from a loss of US$454m in the corresponding period in 2009.

The DJIA of 30 blue-chip stocks rose 1.44% while the broad-market S&P 500 index was up 1.54%. So there seems to be pretty clear evidence our AUD will continue to rally with commodities and equities in the Northern Hemisphere, a trend to be considered as closely as ever before.

Locally we await the release of the Westpac-Melbourne Institute survey of consumer confidence for July, due today at 10.30am AEST.

Federal Treasurer Wayne Swan will release revised economic forecasts, which are expected to show the Federal Budget remains on track to return to surplus despite the re-modelled resources tax by 2013.

Majors: The US Dollar showed strength early in last night's session as the London market felt the downside affects of a fall in Chinese equities and also the Moody's downgrade of Portugal's sovereign rating from Aa2 to A1.

These safe haven gains were reversed after European and US stocks rallied following Alcoa's announcement.

Better than expected earnings from Intel, announced after Wall Street's close, encouraged further USD selling as well.

EUR/USD has strengthened to USD1.2715 as optimism regarding the Euro Zone remains, especially after ECB stress tests continued to support and Greece sold bills at a lesser rate than that which was charged for European Union bailout funds.

A raft of economic data and company earnings are being released over the coming days and weeks.

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