Australia: The Australian Dollar has opened firmer this morning trading at 1.0130 following a positive Friday night in equity markets. The AUD traded to a high of 1.0149 as base metals continued to push higher in the European and US sessions, with copper up 0.6%, while nickel and aluminium both rose 2.25 %. Soft commodities took a breather, with wheat down 3.1%, sugar down 1.5% and cotton off 3.5% after trading at record levels last week.

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Oil endured another volatile session with tensions in the Middle East initially causing it to rally towards USD88 per barrel before the Chinese announced another rate hike which weighed on prices. There is no major data being release today and it is a holiday in the US, hence trading in the AUD is likely to be range bound with any moves to be directed by equity markets and offshore events. There are various economic releases locally and offshore this week.

Majors: The EUR strengthen on Friday night following remarks by an ECB member, which revived expectations of higher interest rates in the euro-zone. While feeling the pressure of rising tensions in the Middle East, the EUR managed to rally Friday after ECB Executive Board
Member Lorenzo Bini Smaghi momentarily shifted the market’s focus by saying the central bank must monitor rising price pressures more vigilantly. His comments were very much inline with those made recently by other ECB members. In an environment where US interest rates are expected to remain low for sometime, the talk of higher interest rates in Europe is likely to boost the EUR and sideline the USD. Elsewhere China announced a 50bp hike in its bank liquidity reserve requirement ratio to 19.5%, as inflationary concerns remain high throughout
much of the region. This is the second time this year that the People’s Bank of China has increased their bank’s liquidity ratio, and the eitght such increase including last year. Global imbalances and accelerating food and energy inflation were top of the agenda at the Paris G20 finance ministers meeting over the weekend. A compromise communiqué to continue “co-ordianted policy action…to achieve strong sustainabale and balanced growth” was the result of the meeting.

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