Bell FX Currency Outlook: The Australian Dollar losses its sparkle as European debt crisis fears worsen overnight.

Australia: The local unit has fallen back below USD0.9900 amid reports of possible credit rating downgrades and widespread bank withdrawals in Spain and Greece.

Disappointing US manufacturing data prompted a run on equity markets into the close with Wall Street ending the session at four month lows.

Yesterday domestically the MI inflation expectation report was released, declining 0.2 points to 3.1% in May. This is just above the RBA's target band and likely puts some restraint on how much further easing in monetary policy the RBA is comfortable with.

There are no major data releases due today therefore we expect the AUD to continue to remain bearish.

Majors: Adding to pressure on Wall Street overnight was a report out of the US showing manufacturing had unexpectedly contracted in May.

The Philly Fed index was released at -5.8 vs. an expected +8.5. US stocks closed at four-month lows as worries spiked over the Eurozone crisis that is plaguing markets at the moment. The Dow fell 1.2% to close at 12,442 whilst the S&P 500 closed 1.5% lower to 1,305.

European markets also tumbled overnight, with the euro hitting a new four month low against the Greenback amid contagion fears in Europe. The FTSE was 1.2% lower at 5,338 whilst the German DAX closed 1.2% lower to 6,309.

Oil prices were dragged lower overnight off the back of reports Moody's will look to downgrade Spanish banks, coupled with the disappointing manufacturing read out of the States. WTI futures declined 0.2% to USD 92.65 per barrel and Brent futures fell 2.5% to USD 107.05 per barrel. The weaker read saw Gold bounce from its recent lows ending the session up 2.3% to USD 1574.28 an ounce.

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