‘All taste and no nourishment’ appears to be the general consensus after the Euro-leaders dinner meeting in Brussels which yielded little in the way specifics or conclusive way forward. Any sign of solidarity or a unified front from Euro leaders is proving to have a limited impact at a time when concise direction is required. The topic of Eurobonds remained in contention with French President Francois Hollande using the event as a platform to promote the need for jointly issued debt. Meanwhile, Italian Prime Minister Mario Monti has also thrown his support behind implementing Eurobonds suggesting they should be considered “when the time is right, but not in too long.” Nonetheless, nations with high borrowing costs in support of jointly issue bonds are likely find strong resistance from Germany who remains opposed to such measures.
Despite solid gains across European equity markets and mild support for stocks across the Atlantic, the overall theme of negativity continued to hold risk assets at bay overnight with intermittent periods of strength quickly overcome with European drama’s remaining the key directive. After falling to fresh 22-month lows the Euro regained some composure throughout the session, but any upside was quickly met with resistance with the pair stabilizing around current levels of $US1.2540. The Australian dollar followed a similar path but has overall outperformed its major counterparts and found moderate support against the greenback. After a brief stint below 97 US cents yesterday, the local unit rose to highs of 98.14 US cents overnight before tailing the Euro lower in the latter part of trade.
With little in the way of local economic directives, we anticipate regional equities to remain the primary driver throughout domestic trade with the AUDUSD pair likely to remain supported above the 97.1 US cent region. At the time of writing the Australian dollar is buying 97.65 US cents.