Global markets continued to succumb to Greece related fears overnight with political parties still unable to form a coalition government. It's clear there's no easy road out of Greece's political dilemmas and given the lack of cohesion we've seen from political leaders the writing appears to be on the wall. A proposal by Greek President Karolos Papoulias to form a technocrat government is likely to be met with strong resistance leaving a return to the polls next month the most viable outcome.
Spanish banks also remained in the firing line with ratings agency Moody's highlighting the vulnerability of Spain's banking system to the recession and real estate crises. Spanish debt remained out of favor with 10yr yields making a break through the 6 percent mark - while Italian borrowing costs also rose after Moody's downgraded 26 Italian banks citing vulnerability to the Euro-zone crises and Italy's recession.
Naturally, the decidedly risk-off market demeanor has promoted safe haven currencies with the US dollar and Japanese Yen continuing their north-bound trajectories. The Euro lead the risk currency charge lower with the EURUSD pair falling to fresh four-month lows and current levels of $US1.2820. The Australian dollar continued its retreat dropping through US dollar parity for the first time since mid December 2011. We've seen the local unit close this morning below the technical and psychological milestone of parity which we consider an important precursor to intraday movement with a move deep into the 98-handle the most likely short-term scenario.
Locally, today will see the release of the RBA monetary policy minutes for May. Traders will be watching for any clearer guidance the RBA may take further policy easing measures. Stevens and Co made the largely unexpected move to cut by 50bps, bringing the official cash rate down to 3.75 percent to represent the largest single cut since the height of the financial crisis. The ensuing statement offered little indication the move was the start of a series of cuts suggesting further surveillance of economic conditions is required to ascertain the viability of further easing. In short, weaker than expected growth coupled with subdued inflationary pressures has afforded the RBA with the scope to ease monetary policy. At the time of writing the Australian dollar is buying 99.6 US cents.