Australia: Investors worries were further fuelled on Friday when Fitch Ratings Agency slashed Greece’s credit rating by three notches to B+ due the massive challenges it faces in order to correct the country’s financial situation.

The AUD traded within a 1 US cent range of USD1.0610- USD1.0710, proving to be fairly resilient amid the EUR sell off and
negative news. Spot gold rallied on the back of safe haven buying, while commodity prices posted some late gains following sell-offs earlier in the week. In the absence of any significant data this week the AUD is likely to be driven by offshore events.

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The recent trading range of USD1.0550-USD1.0700 is likely to prevail, however moves towards the topside might be limited if the situation in Greece continues deteriorate. Not much in the way of Australian data this week, with the main releases being construction work done and private capital expenditure data for Q1, both of which will feed directly into Q1 GDP.

Majors: European debt fears were in the spotlight Friday night sinking the EUR against most of the major currencies. It fell to a record low against the CHF as fears grew that Greece may need to restructure its debt. After scaling to near two-year peaks in early May on expectations of higher interest rates in the euro-zone, the EUR has taken a dramatic fall on Greece’s financial situation over the past week. As mentioned above, Friday’s downgrade to Greece’s credit rating added to investors worries.

Standard & Poor’s also lowered its outlook on Italy to negative on Friday, meaning that there is a 33% chance of a ratings downgrade in the next 24 months. Spain has also come into the spotlight with some analysts viewing its economy as vulnerable to upheaval in its banking sector and debt markets. Concerns were evident in a widening of the yield differentials
between Spanish and German benchmark debt Friday night. There is no major data being released offshore tonight.

Economic Calendar
CH HSBC Flash China Manufacturing PMI May
US Chicago Fed Nat Activity Index APR
EU Various ECB Members Speak throughout Europe
CA Victoria Day Public Holiday

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