After a period of sustained weakness, the Australian dollar rebounded overnight with investors inspired by continued support from Euro-zone leaders to keep Greece in the single currency. Risk currencies rallied in unison with moderate optimism from the Euro region forcing a short squeeze of sorts with the local unit making a break to the upside of 99 US cents once again. The Euro also pared lost ground to forge through the $US1.28-figure to highs and current levels of $US1.2824. We're seeing unwavering support by Euro-zone leaders to keep the negativity from Greece contained while opinion polls from the region show pro-bailout political parties are gaining some momentum.
For now, this appears to be enough to induce a short squeeze of sorts across the risk spectrum however it's clear that without clarity and indeed a solution to Greece's political stalemate, the balance of risk will continue to err on the side of caution. With plenty of dead air to fill between now and the next Greek elections on June 19, without intervention, it's only a matter of time before markets take a deeper south-bound turn.
We've seen a succession of negative themes lead to a sustained period of weakness across the risk spectrum but moderate optimism began to feed through yesterday with investors encouraged by Chinese Premier Wen Jiabao who over the weekend who indicated a need for stimulus in an effort to sustain strong growth in the region. After a series of largely uninspiring data points, there appears to be a significant shift in language from Premier Jiabao which indicates a gradual unwinding of policy initiatives designed to keep inflationary pressures under control.
With little in the way of economic directives today, we anticipate regional equity moves to be the key barometer for the local unit is domestic trade. At the time of writing the Australian dollar is buying 99.1 US cents.