Australia: The People's Bank of China increased interest rates by 25 basis points, and as before, such moves have been bearish for the AUD as this signals slower growth and a potential reduction in Chinese demand for commodities.

Locally we saw the Reserve Bank of Australia maintain the official cash rate at 4.75% yesterday, as widely expected.

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They noted they are comfortable with the current monetary policy stance and expect inflation to remain in the 2-3% band in the near term.

Yesterday also saw the release of the Australian Trade Balance for February, which reported a deficit of $205m, following the surplus of $1,433m in January. Imports were up 5% and exports fell 2% following the effects of the Queensland floods.

The AUD is mixed on the cross rates, with the AUD/JPY stronger, touching JPY88.00 this morning, while AUD/EUR and AUD/GBP are trading at EUR0.7250 & GBP0.6330 respectively.

Base metals were mostly higher in overnight trading with copper up 0.6%, lead up 1.4%, aluminium up 0.3% and zinc up 0.3%. Gold traded to a new record high of US$1,457.45 per ounce while crude oil is trading at US$108.00 a barrel.

Today locally will see the release of the Australian AIG Construction Index for March and home loans data for February. We expect the AUD to range trade in the 1.0300's.

Majors: In the US, equity markets were flat despite some positive comments from the release of the FOMC Minutes.

The FOMC Minutes from the March TH 15 meeting said that the US economic recovery was "gaining traction" with several members now seeing upside risks to their inflation forecasts.

Federal Reserve Chairman Ben Bernanke said in a speech yesterday the Fed would be watching inflation "extremely closely".

Data wise in the US overnight we had the release of the US non-manufacturing ISM, which fell to 57.3 in March from 59.7 in February. Markets are looking ahead to the ECB rate decision with expectations for a 25bp rate hike.

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