Bell FX Currency Outlook: The Australian Dollar has experienced a strong squeeze higher as those with bearish sentiment on the local currency have been taken by surprise "again".

Australia: The AUD has trended higher since yesterday's GDP release and developments overnight and is back above 0.9900 now. Markets and risk appetite bounced strongly with traction gaining speculation of quantitative easing by the US Fed as well as the ECB looking to provide as much liquidity to the European banking system as necessary.

The ECB decision was to maintain its benchmark rate unchanged at 1.00% and there was no long-term refinancing announcement. ECB President Draghi noted the euro zone's "economic growth remains weak" while uncertainty is "heightened" and the outlook did not translate into a significant downgrade of the ECB's growth forecasts with the ECB now expecting
growth in 2012 to be -0.1% and last 1.0% in 2013.

The broad consensus amongst ECB members was to keep policy rates unchanged, noting that real rates are indeed negative. Draghi detailed reasons why the ECB was not in favour of another LTRO but he left options open stating "the ECB stands ready to act".

He also said the ECB will meet all fixed-rate, fullallotment refinancing tenders, in full, for as long as necessary, or until January 2013 at the very least.

Locally, yesterday felt "strange" when the GDP result came in so strongly, rising 1.3% in the March quarter and 4.3%
over the past year. While the GDP data was a "good" outcome, the Australian economy is entering a difficult period, with Europe at the cross roads and Chinese growth slowing. These global factors will continue to keep the RBA on an easing bias (one would suspect).

Today in Australia, the employment data for May is released and a rise in the unemployment rate to 5.1% is expected.
Majors: The USD eased with the improved mood in risk appetite.

The ECB's decision and statements were the precipitator but momentum continued in the US session after Fed Presidents Lockhart and Williams alluded to more quantitative easing. Lockhart said that extending operation ready to do more".

Fed Chairman Bernanke testifies to the US Senate tonight and markets will be looking (maybe hoping) to hear that more QE is likely.

In Spain, the government has yet to formally request aid for its banks, but rumours that European policy makers are putting together a bailout programme for Spain's banking sector allowed the gains to continue.

Tonight the Bank of England meets, Bernanke testifies to the US Senate, and there are bond auctions in Spain and France.
Economic Calendar
7 JUNE AU Australian Employment Data
UK BoE Rate Announcements
US Initial Jobless Claims
US Consumer Credit