Finally some respite for US equity markets overnight with the Dow and the broader S&P rocketing 2.85 and 3.29 percent respectively. The primary catalyst was the dismissal by Chinese officials they are divesting in European bonds – earlier this week a report suggested China will be reevaluating foreign exchange reserves worth US$2.45 trillion.

The news resonated through the currency markets, and by default helped the Euro to return above US$1.2500. The latest burst of investor optimism came at the expanse of the US dollar with the balance of risk falling to higher yielding currencies/commodities. The US Dollar index which measures the dollar's value relative to six major foreign currencies declined near 1.2 percent to close at 86.27.

Economic data from the US saw a revision of Gross Domestic Product failed to meet initial estimates recording 3.0 percent growth in the first quarter. Economist had expected stronger growth of 3.4 percent. Initial Claims for the week ending May 22 also failed to meet estimates to record a drop to 460,000 new claims against the previous week 474,000 new claims. Analysts were expecting a greater decline to 435k.

Locally, the Aussie Dollar soared to highs of 85.3 US cents coinciding with rocketing US equity markets. From a technical perspective, the Aussie dollar still has some upside to correct the massive slide this month. If we cast our minds back to early this month the Aussie was sitting pretty above 90 US cents – until these European concerns began to threaten global growth. This was the catalyst for the downturn, and will also need to be the catalyst from a return to levels of relative strength. At the time of writing the Aussie dollar is buying 85 US cents.