Bell FX Currency Outlook: The Australian Dollar has held ground trading at USD 0.9750 following yesterday's widely expected interest rate cut by the RBA and some disappointing news in Europe overnight.

Australia: The EUR weakened slightly and the USD gained on comments from the Spanish budget minister that Spain was unable to tap private capital markets. Additionally, expectations for joint policy action disappointed after the G7 conference call with no immediate reasons it seems to alter the near-term outlook.

As you'd all be aware, the RBA cut official cash rates by 0.25% yesterday in an attempt to protect the Australian economy against a deteriorating global outlook.

The cut lowered the cash rate to 3.50%, a level last seen in late 2009, and comes as economists expect inflation to remain weak for some time. The Bank is signalling its focus on Greece's election, China's economy (slowing) and the U.S. job market which seems to be stalling.

The AUD remained somewhat firm at USD0.9775 post the announcement, so considering the bearish news out of Spain last night, the AUD is holding up. Of note was the accompanying statement's content on Australia as it provided a slightly more balanced view of the domestic economy than market participants expected.

However, with ongoing uncertainty in relation to the international economic environment and job advertisements once again softening, the feeling is that a further 0.50% of rate cuts are very much on the cards with much of the focus on incoming data over the next two months.

Australia's Q1 GDP is due out today at 11:30am AEST, with forecasts of 1.0% q/q for 3.3% y/y.

Majors: The Spanish Treasury Minister took centre stage suggesting overnight that Spain was losing its access to capital markets, noting the current risk premium on Spanish sovereign debt means that "we have a problem in accessing markets when we need to refinance our debt".

He added that Spanish banks should be recapitalised through the euro zone bail out mechanisms already in place. In Fed speeches overnight, both St Louis Fed President Bullard and Dallas Fed president Fisher stated the US economy has not deteriorated sufficiently to justify further quantitative easing, with Bullard noting "a change in US monetary policy at this juncture will not alter the situation in Europe".

Tonight in Europe, the ECB meets, second estimates of Q1 Eurozone GDP are due and there is also the German 5-year bond auction and Portuguese 6 and 12-month bill auctions and we mustn't overlook the Fed's release of the Beige Book.
Economic Calendar
6 JUNE AU GDP Q1
EU ECB Announces Interest Rates
US Fed's Beige Book
UK PMI Construction MAY