Bell FX Currency Outlook: The Australian Dollar has opened lower this morning again following yesterday's decision by the Reserve Bank of Australia to reduce interest rates by 0.25% to 2.75%.

Australia: It is official now. Australia has finally bitten the bullet and joined the global currency war. The Board decided to act on its 'scope to ease', afforded by a subdued inflation outlook.

Interestingly, there were few specific reasons cited for the move but look for more in Friday's Statement on Monetary Policy.

Reading between the lines, it seems the RBA is saying it is less confident other sectors of the non-mining economy will strengthen to offset the slowing in mining investment, especially given the high level of the AUD.

The market still believes there is a strong show for a further cut with another 0.25% cut targeted as early as June prior to the Federal election.

Heavy short positions appear to have been built in the AUD in recent weeks, most prominently by the speculative community.
The AUD smashed down through the 1.0220 resistance level and is currently around 1.0185.

Desks reported solid demand from a variety of accounts around the 1.0150 level, suggesting an ongoing layer of nearterm
support. Iron ore prices were also stronger for the first time in a few weeks.

The NZD was likewise weaker, dragged down in sympathy with the AUD as decent demand also materialised in AUD/NZD. Today's focus will be on Chinese trade data for April with the market looking for a small trade surplus with exports up 10% and imports up 13.5% (annualised).

One would think the AUD will catch its breath today (aka some consolidation). There are no key data releases out in Australia today.

Majors: On currency markets, the USD has been generally stronger over the past 24 hours but the EUR gained in early Europe, on the back of the Portugal's successful auction, the first for three years, and better than expected German Factory Orders.

However, the EUR could not hold on to its gains, probably reflecting concerns about the new, and more dovish sentiment coming out of the ECB.

The JPY was also stronger against the USD, as it met resistance just below the 100 level against the USD.

It has fallen 20% against the USD in six months but is baulking at breaking through the 100 level. Commodities succumbed to a generally stronger USD with energy, metals and gold all down whilst soft commodities resisted this trend and rose by 0.5% on average.

Note copper is now 7% up on its recent low - another sign of improving investor sentiment.
Economic Calendar
08 MAY CH Trade Balance Apr
US Fed's Stein Speaks at Chicago Fed Confrence
09 MAY NZ Employment Figures Q1
AU Employment Figures Apr