Equity market rally fails to revive Euro demand | May 30, 2012.
Currencies and equity markets told a decidedly different story overnight with strength from European and U.S stocks unable to provide sustained support across risk currencies. For every positive thematic in the market, there's equal and opposite negativity holding back a sustained rally and although we've seen positive movements across European and U.S indices, risk currencies remain capped under the weight of Euro-region uncertainty.
The Australian dollar found intermittent periods of support overnight but selling pressure ahead of 99 US cents capped gains alongside the Euro with the EURUSD pair making a break to the downside of $US1.25-figure to fresh 23-month lows of $US1.2460.
Further weakness from the Euro coincided with a downgrade from ratings agency Egan-Jones which cut its rating for Spanish debt in Junk territory. Although a smaller firm then the three most watch ratings agencies, market participants considered it a pre-cursor to what we may see from the big three, S&P, Fitch and Moody's.
European indices recorded strong gains with the CAD and DAX both rising over 1 percent, while the FTSE trailed behind with pressures from southern Europe the primary stumbling block. German consumer prices grew at an annual pace of 2.1 percent in May according to official data released overnight, falling short of economists estimates and the previous reading of 2.1 percent.
Optimism surrounding Greek polls which signalled pro-bailout parities are gaining support underpinned gains across the Atlantic with U.S equities finding form. The S&P500 and DOW which both recorded over 1 percent gains.
The highlight of the local day will be the release of retail sales data which is expected to see sales grow 0.2 percent in April down from 0.9 percent growth in March. Also on the docket is the construction work gauge - both are due for release at 11.30 AEST. At the time of writing the Australian dollar is buying 98.5 US cents.