Bell FX Currency Outlook: Australian Dollar dips in morning trade on Italian political instability.

Australia: The Australian dollar has opened slightly lower after finding some support and lifting from its lows in early morning trade.

The currency came under pressure in yesterday's session as China's manufacturing sector in February retreated from two-year highs.

The HSBC flash PMI slipped to 50.4, down from January's 52.3 and the lowest in four months.

The AUD rose as high as 1.0330 against the Greenback overnight before falling as low as 1.0262 on the Italian election results. The election result could continue to weigh on the Australian Dollar during the local session today by driving investors into safe-haven assets and away from risk.

Markets will also watch developments in Japan where the new Bank of Japan Governor is expected to be announced soon. Domestically today will see RBA assistant Governor Debelle speak and early hints on another round of rate cuts to reign in the dollar has kept the currency subdued in early trades.

Majors: The euro was sharply lower overnight as market focus was on Italian elections, and exit polls suggesting former Prime Minister Berlusconi may have secured enough votes to secure Senate control is being priced into markets.

The centre left Democratic Party headed by Pier Bersani looks to have secured sufficient votes to rule the lower house, but fears of a "hung" parliament and Berlusconi securing the Senate is being taken in by markets. This saw the EURUSD and USDJPY lower.

The flow of funds out of the Eurozone provided support for the pound in the aftermath of the UK being stripped of its AAA credit status.

European equities were higher but closed just as the Italian election results hit headlines. The DAX ended 1.5% higher at 7,773 while the FTSE closed 0.3% higher at 6,355. US equities declined on the election outcome with the DJIA ending 0.5% lower at 13,925 and the S&P 500 fell 0.7% to 1,505.

Oil prices were little changed while spot gold saw a technical rebound after its recent sell off; buoyed by concerns over the Italian election outcome.

Metals and commodities were generally lower on a stronger USD and the weaker Chinese PMI read yesterday. Markets will likely remain focused on Italian political news, but will later focus on US Fed Chairman Ben Bernanke's semi-annual testimony to the Senate banking committee.

US Consumer confidence and New home sale will also be released.

Economic Calendar
26 FEB US S&P / CS 20 City
US Consumer Confidence
NZ RBNZ 2yr Inflation Expectation
For latest pricing, ranges, visit www.bellpotter.com.au