The anticipation ahead of this week's European Council meeting maybe high, but it's clear the bar has been set low with the broad market consensus suggesting we're unlikely to see anything groundbreaking to induce a meaningful near-term rebound across the risk spectrum. With German Chancellor Angela Merkel remaining steadfastly opposed to jointly issue debt in the form of Eurobonds, investors are hoping Germany will at least ease their resistance to other initiatives such as allowing the EFSF/ESM rescue funds to buy distressed government debt. Nevertheless, European stocks showed a sense of optimism ahead of the summit overnight with the DAX and CAD finishing 1.5 and 1.67 higher, but the Euro told a decidedly different story with price action capped below $US1.25-figure. Downside pressure on the Euro was maintained throughout the session with the $US1.2440 region once again providing support. A lower than expected CPI print in Germany has also provided further weight to the argument the ECB will ease monetary policy at next week's meeting. Southern European debt markets also maintained a less than inspiring outlook with Spanish bond yields edging closer to the 7 percent region, despite a solid day across equity markets.

Across the Atlantic, U.S markets found solace in stronger than expected home sales data with the positive lead from European equities also providing a solid platform for gains. New home sales rose at a yearly pace of 15.3 percent beating analysts' estimates of a 10 percent rise. Durable goods orders rebounded more than anticipated in May rising 1.1 percent against expectations of a 0.5 percent rise.  

The Australian dollar traded in a tight 35 pip range overnight with price action unable to break through previous resistance around the 100.85/9 US cent levels. Still the Aussie recorded modest gains against its major counterparts with strength against Sterling and Japanese Yen leading the charge higher. Conjecture over the possibility of near-term policy easing from China has also provided a mild upside bias for the Aussie dollar. Mid-tier data on the local docket today includes the HIA New homes sales data. Barring any strong leads across regional equity markets, we anticipate the local unit will continue to adhere to its current range between 100.5 and 100.9 US cents with a further leg-down likely to be contained above U.S dollar parity. At the time of writing the Australian dollar is buying 100.75 US cents.