Australia: Most of the news during early trading in the offshore session related to continued concerns over Europe's debt issues, with the AUD remaining fairly flat during this time.

However, late in the session saw a large jump in commodity prices across the board.

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Oil jumped above USD100.00/barrel, increasing 6% and silver had it's biggest one day gain since November 2008 gaining 7%; reversing some of last weeks losses.

This helped push the AUD through USD1.0800. The 2011 - 2012 Federal Budget is due to be handed down tonight, with markets expecting a fairly tough and tight budget, to achieve the Government's plan of returning the budget to surplus by 2012 - 2013.

Whether the budget does in fact return to surplus during this time will depend heavily on the government's assumptions for the terms of trade and the AUD.

Current estimates for the 2010 - 2011 budget deficit is $49.4bn which equates to 3.6% of GDP with the figure reducing to $16bn, or 1% of GDP in 2011 - 2012.

While it's unlikely that the budget, which will be released tonight, is likely to have much of an impact on the AUD; should the government predict that we're likely to return to surplus earlier than the markets are expecting, then this will be seen positively in the market.

Majors: As mentioned above, most of the market movement overnight was dominated by developments out of Europe. S&P announced that is has downgraded Greece's credit rating by two notches to BB- while also keeping a negative watch on the region.

This is the fourth downgrade in its credit rating in just over a year. This sent the EUR/USD into a tail spin falling to USD1.4250.

Since last Wednesday's highs around USD1.4900 this is a 4.6% fall. Talks continue about the possibility of reducing the interest rate on Greece's debt repayments, but many are concerned that this isn't going to help them in the long term and will only see half of their loans repaid.

S&P also mentioned concerns over Portugal in their announcement saying that "failure for Portugal to meet their fiscal target attached to the EU/IMF programme will see the trigger pulled for a further downgrade".

The GBP/USD was also weaker overnight as data released showed that their housing market continues to struggle. The Halifax Housing price index fell 1.4% in April; contributing to the year ended result of -3.7%.

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