Bell FX Currency Outlook: The Australian Dollar managed to respect the recent support level of USD1.0300 overnight following yesterday's interest rate decision to lower the cash rate by 0.50% to 3.75%.

Australia: The base of USD1.0300 held not just in the face of the RBA's decision but also the better than expected ISM Manufacturing report for April. We'll discuss this later, but the first focus has to be the RBA's decision.

Weaker economic conditions in recent months were cited as being the rationale, and it seems clear the RBA is concerned the rate cuts
of last year have had little impact on confidence and activity.

The RBA is targeting growth and if data flow remains soft, we should expect further cuts. Whilst the markets were convinced a cut would be announced, the magnitude was the real debate. A cut of 0.50% was seen to be one that may test the AUD's resolve to stay above this infamous USD1.0300 support level.

It has been felt for some time that a break though this point may signal a retracement to November 2011 low's in the USD0.9600
region which would be a massive relief to exporters.

So in isolation, there had to be a chance USD1.0300 would be broken but the strong data flow out of the US saw the AUD outperform the crosses, especially against the EUR, JPY and GBP. AUD/CAD was even more the case with the cross now below CAD1.0200 for the first time in a while. (The CAD is holding its ground given Canada's direct trade and economic ties to the US).

Given USD1.0300 held, the reports out of China and the US helped it hold as these reports were both seen as positive for the global economy and therefore, Australia. There is no key data in Australia today whilst off-shore there are PMI reports in China, India and Europe.

Majors: Markets were buoyed overnight after the ISM manufacturing index exceeded expectations, rising to 54.8 in April, which is the highest level since June last year. Gains were revealed in production, there were new orders, employment and export orders and a change in sentiment about further easing in the US.

Chinese PMI gained although it was below expectations. European markets were closed observing May Day holiday (and public protests against austerity measures in some European cities). UK manufacturing PMI fell as well. Base metals were mixed as were soft
commodities. The results out of the US and China do suggest stabilisation in the industrial cycle.

Economic Calendar
2 MAY CH Manufacturing PMI Apr
EU Eurozone Unemployment Rate Mar
GE Unemployment Data Apr