Australia: The Australian Dollar has opened this morning below 0.8900 after sliding from its Friday close in the US of 0.8940 after the results of the Australian federal election on Saturday that has produced the first hung Parliament in 70 years.

The AUD is likely to remain on the weak side until a new government is formed but many analysts expect the legislative process to be difficult even after the ultimate makeup of the government is known.

At this point in time the incumbent ALP government has won 70 seats in the House, the Coalition 72, the Greens one seat and independents two seats with five seats still in doubt.

The Greens will control the balance of power in the Senate from July 2011 so clear policy directions in Australia is unlikely for some time.

Financial markets hate uncertainty so until the political picture is resolved we would expect the AUD to trade in a modest range.

As always the AUD will be more influenced by offshore factors, which late last week did not provide any real insight on how the markets will trade this week.

With the northern hemisphere concentrating on summer holidays the equity markets on Friday were slightly softer with the Dow down 0.6% to 10,213, the S&P 500 0.4% lower to 1072 after European equity all weakened between 0.3% for the FTSE to the French CAC down by 1.3%.

Crude oil was down to just below US$74 a barrel and base metals all softened but gold was only off a touch to US$1228 an ounce.

Majors: The AUD cross rates have suffered after the election results with the AUDEUR retreating to below 0.7000 after reaching 0.7040 on Friday evening.

AUDGBP is weaker and approaching 0.5700 while the AUDJPY has slipped below 76. There is not a lot of new data being released in Australia this week although the US will release data on new home sales, durable goods orders and revisions to Q2 GDP.

Over the weekend an ECB member, Alex Weber, argued that stimulus measures supporting European banks should not be withdrawn until the first quarter of 2011. Tonight preliminary Euro-zone PMIs for August are to be announced with little change anticipated.

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