The Australian Dollar has opened this morning in the mid 1.0500’s as commodity markets weakened on Friday and the USD rose against major currencies.

Australia: Inflation data released on Friday in the US was in line with expectations while the University of Michigan consumer survey surprised on the upside. April CPI rose 0.4% mom to be up 3.2% yoy. Inflation projected one year ahead is 4.4%. Again, the major factor affecting the figure were energy costs which were up 2.2% mom. Consumer sentiment increased from 69.8 to 72 for the month of May.

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These relatively benign numbers were overshadowed by the ongoing sovereign debt crisis in Greece and to a lesser extent in Portugal, which saw the EUR retreat and the USD gain, which pushed the AUD lower to USD 1.0523. It appears the correction in the AUD may have a bit further to run after the AUD touched twice the AUD/USD 1.1000 in the last several weeks.

Equity markets in both Europe and the US were softer with both the Dow and S&P 500 falling 0.8% as gold moved slightly lo lower to US$1495 an ounce. The oil was slightly stronger with WTI crude just under US$100 per bbl due to the floods in the US and good GDP data out of Europe. This week is quiet in terms of data releases with housing finance for March out today (2% growth expected) and vehicle sales for April.

Majors: GDP data for the EUR, especially for Germany and France, were better than expected with the German economy expanding by 1.5% in Q1 (0.9% expected) and France expanding by 1% qoq despite just 0.6% being expected. For the whole of the EU, GDP rose 0.8% qoq which is just above the 0.6% expected. Projected GDP growth for the EU remains at 1.6% for 2011 and 1.8% in 2012 with inflation averaging 2.6% for 2011.

These relatively good figures were overshadowed by the ongoing concerns on Greece’s overall debt situation, which may reach 143% of GDP this year and 165% in 2012. Another EU meeting starts today to discuss Greece’s ongoing dramas which may see it not meet the targets of the recent EU bailout (budget deficit for 2011 to be a maximum of 9.5% of GDP). This pushed the USD to a 6-week high against the EUR.

Economic Calendar
US Fed Lockhart (non voter) speaks US economic outlook
AUST Housing Finance MAR
EC Euro Zone CPI APR
US Empire Manufacturing MAY

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