Aussie Rebounds On Strong GDP, Lifts Asian Markets

Asian markets strengthened today and pared much of this week's lost, following mild recovery in the Dow overnight. Sentiments was also given a lift by strong Australian data. Aussie GDP showed an impressive 1.3% qoq growth in Q1, more than double of expectation of 0.5% qoq and was triple of Q4's 0.4% qoq. Year-over-year rate also jumped to 4.3% versus consensus of 3.2%. Australian treasurer Swan said hailed the data as a "remarkable outcome" and "reaffirms Australia's position as one of the strongest economies in the world." Also, Swan noted that "in through the year terms, this result is the fastest growth in over four years, which have been the most turbulent in the global economy since the Great Depression of the 1930s." Aussie recovered yesterday after RBA cut rates by -25bps, not as worse as some expected with -50bps cut. Such recovery extends today but we'd need to see if AUD/USD could get through parity again to confirm the underlying strength.

G-7 leaders showed concerns about the lingering sovereign debt crisis in the eurozone and pledged to help Greece and Spain improve their public finance. After the conference call, the US Treasury stated that "The G-7 ministers and governors reviewed developments in the global economy and financial markets and the policy response under consideration, including the progress towards financial and fiscal union in Europe." The focus is now turned to the upcoming G-20 summit on June 18/19. In Spain, despite the government's denial, speculations that the country would tap financial assistance from the EU/IMF intensified. Germany's Die Welt newspaper reported that the debt-laden country would receive a precautionary credit line from the European Financial Stability Facility (EFSF).

Comments from two Fed officials yesterday cooled speculations of further easing from Fed. St. Louis Fed Bullard said that 2012 outlook has "not changed significantly" so far and noted that change in US monetary policy won't alter situation in Europe. Meanwhile, Dallas Fed Fisher simply said that "short of an implosion, I cannot support further quantitative easing." Nonetheless, Chicago Fed Evans, a known dove, continued his push for additional stimulus. Evans reiterated that "with huge resource gaps, slow growth and low inflation, the economic circumstances warrant extremely strong accommodation." Markets focus will turn to Vice Chairman Yellen's Speech today and Chairman Bernanke's testimony tomorrow.

ECB meeting will be a major focus today. The ECB is expected to stand on the sideline on the June 6 meeting, despite the rapid deterioration of financial and economic conditions in the eurozone since the last meeting. Staff projections will likely be revised lower in terms of growth and inflation outlooks. The major task for the ECB is maintenance of price stability which has not been threatened, allowing more time for the central bank to gauge more changes in economic indicators for now. Moreover, the recently selloff in the single currency has delivered equivalent effects of monetary easing. That being said, the monetary statement would be more dovish than the May one.

On the data front, UK PMI construction, eurozone GDP revision, German industrial production, US nonfarm productivity will be released. Fed's Beige Book economic report will also be featured.