The AUD has strengthened overnight after a downward revision in our local CPI data saw the AUD fall to below USD1.0200 during our trading session yesterday.

Australia: The underlying inflation result for Q2 was revised down with the trimmed mean now 2.5% compared to a previous result of 2.7% and the weighted mean also down 2.6% from 2.7%. These revisions were made after there was a change in the seasonal adjustment methodology adopted by the ABS. This new methodology will see the RBA amend its forecasts for inflation, and it is now expected that we will be unlikely to hit the current inflation forecast of 3.25% by Q4. This gave the market some hope yesterday that we may see an interest rate cut at some point in the future if inflation is not going to be as high above the target range as previously expected. This saw the AUD lose over a cent yesterday, but has since rebounded after offshore equity markets posted gains, and France and Germany reaffirmed their commitment to Greece.

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Both the French President and German Chancellor spoke to the Greece Prime Minister overnight and confirmed that they will continue to support the country. This gave the markets a positive lead and reduced concerns that Greece will default. Australia's New Motor Sales data is due for release this morning, but it is unlikely to have an impact on the markets.

Majors: A positive night on the US equity markets came after the news that Europe's strong hold economies of Germany and France will continue to support Greece. The DOW finished up 1.3% at 11247, and the S&P 500 posted the same gain of 1.3%. The DOW was trading more than 2.5% towards the end of the trading session, but halved its gains in the last hour of trading. Today sees the release of some fairly influential US data including its CPI for August, Industrial Production and the Empire Manufacturing both for August as well. It's hopeful that some positive results in these releases will divert the attention away from the problems in Europe and provide the markets with some new headlines. In other news out of France; as expected Moody's have downgraded two of their banks (Credit Agricole SA and Societe Generale SA) one notch due, to their large exposure to potential losses if Greece does in fact default. While this news did initially weigh on the EUR/USD; the news that Germany and France will support Greece did help the currency pair. It is also thought that the losses after the downgrade weren't as large as expected because despite the support Greece has, it seems as though the markets have already priced in a possible default by Greece.

Economic Calendar

15 SEPT EU Euro-zone CPI AUG

UK Retail Sales AUG

US Industrial Production AUG

US CPI AUG

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