True to recent form, global equity markets were once again governed by European debt concerns. The Euro which is at 18 month lows against the greenback could really hurt US industry which has enjoyed the spoils of a low USD as it provides a competitive advantage over competing economies. The Dow and S&P finished 1.5 and 1.88 percent lower respectively with the balance of risk falling to the perceived safety of the low yielding heavy weights the USD and Yen. By default this saw the Aussie finish at day lows for the week around 88.5 US cents, however the Aussie has maintained around all time high levels against the Euro finishing at AUD1.3953 or around 71.67 Euro cents.

Gold was a primary beneficiary on Friday, remained buoyant to finish at 1,233 a troy ounce after earlier in the session climbing to fresh all time high of 1,249.7 an ounce. Gold’s appeal right now is all about an alternative safety and quality investment and just because the Greenback is heading north, doesn’t mean we need to see Gold heading south.

The local unit will be contingent on were the balance of risk falls surrounding European debt woes. I think the key barometer will be US equities which will ultimately be driven by Europe and not to mention key economic data namely Fed minutes, CPI and housing which will all be clues into if the Fed will change their stance on the ‘exceptionally low rates for an extended period’ language. Locally we don’t have a very full week for economic data with the exception of RBA minutes for May – at this point after a decent round of monetary policy tightening, the common consensus and certainly our view is the RBA will take a sit on their hands approach in June.