Australia: Overnight we saw the AUD break through USD0.9000 and this morning it is currently trading comfortably above this level.

The strength in the AUD came as the US had better than expected new home sales and also positive earnings results from FedEx which helped the equity markets to once again post solid gains.

The DOW was up 1.0% to a level of 10525 with the S&P 500 and Nasdaq also up 1.1% and 1.2% respectively.

The data released overnight saw the USD fall and demand for the riskier, growth currencies such as the AUD rise.

All eyes are still on tomorrow's CPI data, with the RBA's recent statements all pointing to the importance of this data and its influence on further interest rate movements.

Yesterday saw the release of Australia's Producer Price Index for Q2 which posted softer than expected results.

Markets were expecting an increase of 0.8% but actual results were weaker at 0.3%. Despite this weak data it's not expected to influence tomorrow's CPI data with the market still expecting an increase in core inflation of 0.8%.

With a lack of local data due out today it is likely that we could see some profit taking during the local trading session as investors take advantage of the overnight gains; although the pull back may be limited as our equity markets will likely follow the strong lead from overseas markets.

Majors: As mentioned above, better than expected new home sales in the US and also an increase in FedEx's earnings outlook for the first quarter and full year increased the risk appetite in the market.

Sales of new homes in the US rose to 330k in June which is a 24% increase compared to last months sales of 267k. The May results also had a further downward revision of 33k.

The 24% increase was well above expectations of a 3.7% increase that had been predicted by economists.

The EUR/USD was also stronger as the USD weakened against most crosses overnight, not just against the AUD.

The GBP/USD also had a strong night as it rose to a 3-month high, benefiting from the better than expected GDP data released the day before and currently trading just below USD1.5500.

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