After taking successive blows in the domestic session yesterday, the Aussie dollar regained ground overnight coinciding with relief rally across equity markets global markets. True to recent form, the great European debt debacle continues to steer the ship with comments from European officials providing some solace to a debt-fatigued market.
In a sign of unity, France President Nicholas Sarkozy and German Angela Chancellor Merkel sought to calm markets overnight making a joint statement stressing Greece’s future in the Euro-zone remains intact. The statement also highlighted Greece’s commitment to the reaching the fiscal targets needed to secure further economic life-support.
The question on everyone’s lips at the moment is can China come to the rescue? Markets are holding on to any glimmer of hope - the news that China has made a tentative decision to step up purchases of European debt has given some light at the end of the tunnel in an otherwise dark economic environment. Nevertheless, the continuance of these economic issues from the European region is almost as sure as death and taxes – thus putting the chances of another major risk-induced sell off across global markets a near certainty.
That said the Euro was able to claim ground against major counterparts overnight but support for the safe haven units remain with EURCHF pair precariously hovering above the 1.20 levels. At the time of writing the Euro is buying 1.2045 centimes.
The Aussie dollar has crossed back through the 102 US cent levels but remains pressured just below 103 US cents. The day ahead will see the release of new car sales for August and the RBA quarterly bulletin. From a technical perspective, price action has displayed supportive behavior around the 101.75 US cents; we’re expecting local and Asian equity markets to provide the key directive in the local session.