Australia: The AUD has been on a wild ride over the last 24 hours as risk aversion spurred another round of solid selling. The local unit was sold off dramatically during the offshore session, breaking through USD0.8400 to trade down to a low of USD0.8358. Ongoing concerns in relation to the situation in Europe, and talk of a possible slowdown in China, are the main drivers behind the AUD weakness. A late turnaround in the EUR helped pulled the AUD back through USD0.8400 and we have opened the local session trading back around USD0.8460. Given the amount of ground the AUD has given up over the last week it could be argued that we are due for a bounce or at least a period of relative stability. Such a scenario is really going to be dependent on how the equity and commodity markets perform over the coming days.

Majors: Concerns over the European debt crisis continue to dominate the market’s attention. Unexpected events will generally always cause market nervousness and yesterday’s announcement from the German financial regulator BaFin that they would be banning naked short selling definitely took the market by surprise. The move was definitely unexpected and appeared to also take other EU members completely by surprise, with the French Finance Minister commenting that “governments affected should be consulted”. European equity markets fell dramatically as a result, with the German DAX down 2.9% and the UK FTSE off by 2.8%. The EUR fell to a 4-year low against the USD but pared back some of its losses later in the session. Talk began to emerge that the ECB may intervene in the market to buy euros causing some traders to take a cautious approach to further selling. With everything that has been happening in Europe, events in the US have definitely been sidelined a little, but the minutes of the Fed’s April 28 FOMC meeting, which were released overnight, were relatively positive. GDP forecasts for 2010 were increased a little while unemployment figures were revised down marginally.