For the Aussie bulls, the past week or so have been very tough. After threatening 1.05 late last month, the AUD dropped to near 1.01 overnight, its lowest level for the year thus far. As we have been highlighting, it has been a combination of local and international forces that have sunk the currency. Last week the RBA surprised with a 50bp rate cut, and there looks to be more to come from the central bank – on Friday it published forecasts for both inflation and growth which were lower than previous estimates. Also, the RBA, just like traders and investors, is increasingly cognisant of the risks of a significant sustained downturn in Europe – last week’s data suggested the recession evident in the south of Europe would be deeper than expected. An additional uncertainty in Europe is a growing backlash against fiscal austerity as demonstrated by the weekend’s election results.