Australia: While the AUD squeezed higher initially last night, a sell-off of risky assets followed on from Friday's weaker session, with the AUD falling back to yesterday's levels.

Overnight the DOW was down 0.4% as investors continue to be concerned about the market's ability to extend recent gains as the end of the Fed's stimulus program draws closer.

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The S&P was also down 0.6% while the Nasdaq fell 1.6%. Commodity prices were also weaker with silver taking another large one day loss down 4% while oil was down 2.7% to be USD96.97/barrel.

Today markets will be closely watching the RBA's May Monetary Policy Statement, due to be released at 11:30am AEST, for clues as to when they will next pull the trigger on interest rates.

After the release of a fairly hawkish Quarterly Statement earlier this month, investors brought forward their expectations of an interest rate rise, with most institutions are pricing in a June hike.

Should the hawkish comments continue in this statement, then this could provide support for the AUD in the short term.

However, markets are also suspecting that we could all be surprised by the statement; with the recent drop in commodity prices and the weaker than expected employment data experienced this month, could provide the RBA with reason to remain on hold for another month or two.

Majors: European debt issues continue to dominate the offshore trading session.

Last night the European Union finance ministers approved a EU- IMF bailout plan for Portugal amounting to EUR78bio; the third bailout of a Euro-zone country since the GFC.

This is on top of the continuing problems that plague Greece; with members unable to come to an agreement on how to support the ailing economy and whether to restructure its debt programme.

Despite the continued concerns, the currency pair found some footing overnight as the attention was drawn to the interest rate differentials between the Euro-zone and the US.

Inflation in the Euro-zone reach a 30month high of 2.8% in April, which reminded investors that the European
Central Banks tightening monetary policy is likely to outpace that of the Federal Reserve.

The US Housing data released showed that the housing market is still extremely fragile and still has a long way to go before it recovers with the 6month forward index for housing falling to 20 in May from 26, which is the lowest level in 9months.

The Empire Fed Manufacturing data was also weaker, dropping sharply from 21.7 to 11.9 in May.

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