Australia: The Australian dollar lost ground overnight falling a cent to USD0.8700 in a volatile offshore trading session following weaker US housing data and concerns over Europe. Yesterday in China the PBOC set the mid-point for its currency target band at 6.798, a 0.4% appreciation from the previous day. The AUD immediately bounced about 50points on the announcement. Locally the ABARE revised their Australian commodity forecasts, showing strong minerals and energy exports for 2010-11 of $169.8bn up 28.5% on expected 2009-10 levels. Farm exports are also expected to rise 2.5% to $29.1bn in 2010-11. With no local data due for release today the market will likely be once again looking to offshore events for direction.

Majors: As mentioned above, US equity markets fell following the release of US Existing home sales data, which dropped to a seasonally adjusted annual unit rate of 5.66 million in May. That was down from the 5.77 million unit rate in April and short of forecasts for a rise to 6.1 million units. Energy stocks fell following comments that the US Government would appeal against a court decision that lifted a White House Ban on deep water oil drilling. European markets fell following French bank BNP Paribas’ downgrade by ratings agency Fitch Ratings, while Standard & Poor’s increased its forecast on loan losses for the banking sector in Spain. In the UK the widely anticipated Budget announcement highlighted that expenses would be cut and a new tax on banks would be applied as the UK government attempts to get its deficit under control by 2015. The consumption tax (VAT) will increase from 17.5% to 20% while capital-gains tax will increase from 18% to 28%. The GDP forecasts are 1.2% in 2010, 2.3% in 2011and 2.7% in 2014 & 2015. Tonight will see the market focus on the US FOMC decision, while also in the US, New Home Sales data will be released.