Money and Forex Blog

:: Australian Dollar: The Aussie’s three-week ascent towards US90.50 came to an abrupt halt yesterday immediately after the release of the much-anticipated June quarter inflation data. The consumer price index increased by 0.6 per cent in the three months to June from 0.9 per cent in the March quarter. The annualised headline rate is now 3.1 per cent compared to market expectations of 3.4 per cent. The currency dropped sharply from 0.9010 down to 0.8925 as the data all but rules out a near-term rise in official interest rates. The market was “long” leading into the announcement and the lower-than-expected figure caught many by surprise. The Reserve Bank of Australia meet next week to discuss monetary policy and they will be looking closely at today’s data, in particular the “trimmed mean” CPI which rose 0.5 per cent for an annualised reading of 2.7 per cent. Meanwhile, the Aussie opens today at 0.8900.

- We expect a range today in the AUD/USD rate of 0.8865 to 0.8945

:: Great Britain Pound: Despite a reality check on the state of the U.K economic recovery from the Bank of England Governor Mervyn King the Cable managed to hold onto support ahead of 1.5550 to trade in a range between 1.5560 and 1.5630 for the majority of the overnight session. In his testimony to the Treasury Select committee in London King said there “will come a point when we will certainly need to ease off the accelerator and return Bank Rate to more normal levels” in reference to the possibility of increasing interest rates and removing some of the emergency stimulus. However he also went on to say that despite him “looking forward” to that time it fears that “there is some considerable distance to travel before we can begin to use the word normal”. The GBP opens this morning at 1.5590 and 1.7485 against the U.S and Australian dollars with more upside possible on the GBP/AUD and GBP/NZD (2.1600) crosses in Asia today.

- We expect a range today in the GBP/AUD rate of 1.7400 to 1.7500

:: New Zealand Dollar: As expected the Reserve Bank of New Zealand (RBNZ) increased the official cash rate by 25 basis points this morning making the country’s overnight interest rate now 3%. In the accompanying statement Governor Allan Bollard commented “the pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement. Our policy assessment will be continually reviewed in light of economic and financial market developments.” The Kiwi dropped following the announcement and press conference from 0.7280 to 0.7205. Adding to the Kiwi’s volatility in the last 24 hours was the release yesterday of the NBNZ Business Confidence report which indicated that NZ companies have become a little bit more pessimistic about the domestic conditions. The reading came in at 27.9 down for the previous months reading of 40.2.

- We expect a range today in the NZD/USD rate of 0.7140 to 0.7250

:: Majors: With little in the way of European economic data released overnight the Euro continued to trade sideways around the 1.3 handle. For the second time in less than 24 hours EUR/USD tested topside resistance near 1.3050 and failed, pulling back to an overnight low of 1.2970 opening at 1.2990 in Asia today. Despite the relative inactivity against the Euro the Greenback weakened against the Yen, falling from 88.10 to 87.25 following disappointing economic data with Durable Goods orders coming in below expectations falling 1% in June. The closely watched Fed Beige Book which measures economic activity across the banks 12 districts said “Economic activity has continued to increase, on balance, since the previous survey” however there are concerns about the property sector as “Nearly all Districts reported sluggish housing markets in the months since the homebuyer tax credit expired on April 30”. The tone of the release was similar to that of the testimony delivered by the Fed’s Chairman Ben Bernanke last week and reinforced the view that the economic recovery in the U.S will be a long drawn out process with employment growth likely to remain subdued for some time to come. North American equity markets finished the session down slightly increasing risk aversion and weighing on the ERU/JPY cross which topped out at 114.75 and opens in Asia lower at 113.60 after having traded as low as 113.20.

:: Data Releases:
AUD: New Home Sales, June
CAD: No Data Today
EUR: German Unemployment Rate, French PPI, June; EZ economic confidence, July
GBP: Mortgage approvals, June
JPY: No Data Today
NZD: RBNZ Interest Rate Decision; Trade Balance, June
USD: Initial jobless claims, week ending July 24

:: Australian Dollar: An increase in the Australian Conference Board leading index from 0.1% to 0.3% during the month of May added some underlying support to the Aussie dollar in Asia yesterday as it held firm above the 90 cent handle etching out gains to enter offshore exchange at 0.9025. The AUD/USD moved above 0.9050 overnight before sellers stepped in to take profit on the move ahead of today’s critical Australian second quarter Consumer Price Index report. Although headline inflation is expected to come in well above the 3% mark the market will closely scrutinise the RBA’s preferred measures, the trimmed and weighted means which strip the result of the more volatile components and concentrate on core inflation. Analysts are expecting an increase in inflation and as a consequence have been pricing in a rate rise next week when the central bank meets which does leave the Aussie dollar open to some downside below this morning’s open at 0.9010 should the result come in below forecasts for an annual rate of 3.4% (headline) or 3% (trimmed mean).

- We expect a range today in the AUD/USD rate of 0.8925 to 0.9075

:: Great Britain Pound: With the market keen to buy Pounds the release of a massive increase in the CBI Realised Sales index from -5 to 33 (expectations of a rise to 2) triggered another rally in the GBP/USD exchange rate. Following the announcement the cable jumped from 1.5450 1.5575 before pulling back slightly after it was revealed that the Confederation had changed its calculation formula for this release. Nevertheless disappointing U.S consumer confidence figures saw the Greenback weaken taking the GBP to this morning’s open on its highs just shy of 1.5600 at 1.5590. With the AUD holding steady ahead of this morning’s inflation report the cross rate opens higher as well exchanging around the 1.7300 handle in what promises to be a volatile trading day on the GBP/AUD cross.

- We expect a range today in the GBP/AUD rate of 1.7225 to 1.7425

:: New Zealand Dollar: The Kiwi was dragged higher by EUR/USD strength overnight pushing to 0.7395, its highest level since January. A strong confidence survey out of Germany was in stark contrast to the U.S Conference Board’s consumer sentiment index which fell to a five month low helping EUR/USD and NZD/USD remain firm. Selling late in the North American session sees the NZD open today back at 0.7320 ahead of the release of the NBNZ Business Confidence Survey and the Australian CPI report which will dictate direction in local trade.

- We expect a range today in the NZD/USD rate of 0.7250 to 0.7375

:: Majors: After hovering around the 1.3 handle in Asia yesterday EUR/USD rallied to a high of 1.3045 during the European trading day following the announcement that consumer confidence in Germany, as measured by the GfK survey increased from 3.6 to 3.9, its highest level in 8 months. Adding momentum to the move was demand for the EUR/JPY cross which pushed through technical resistance at 113.50 dragging USD/JPY higher with it as well. The Yen weakness permeated through the market and the Greenback benefited climbing from 87 to within a whisker of 88. Consumer confidence in North America recorded a lower than expected reading for July coming in at its lowest level for five months putting a dampener on the Dow Jones Industrial Average however it did still manage to etch out some small gains finishing the session 12 points higher. This morning sees the big dollar open in Asia back at 1.2995 and 87.85 against the Euro and Yen respectively ahead of this evenings key U.S data releases.

:: Data Releases:
AUD: Q2 CPI
NZD: Jul NBNZ Confidence Survey
USD: Jun Durable Goods & Fed Beige Book Report
GBP: BoE Governor Testimony
EUR: Jul Prelim German CPI
JPY: BoJ Kamezaki Speaks & Jul Small Business Confidence

:: Australian Dollar: The Aussie dollar held on to support around 0.8940 during the Asian session despite a lower than expected second quarter Producer Price Index or PPI as its referred to. PPI is an important measure of supply side inflationary pressures as it measures the price of finished goods and services sold by producers. Economists had forecast a result in excess of 1% with the 0.3% rise casting some doubt about the likelihood of an interest rate rise next week when the RBA meets. Despite the news however the AUD remained resilient entering the offshore session around 0.8970 before eventually moving higher during the U.S trading day. Strong North American housing data and a rally on Wall Street spurred demand for the AUD with the psychological 90 cent barrier finally giving way. This morning sees the local unit open near the highs around 0.9020 ahead of the Conference Boards Leading Index for the month of May which will provide the market with a forecast on the short to mid-term state of the economy.

- We expect a range today in the AUD/USD rate of 0.8975 to 0.9075

:: Great Britain Pound: The Cable finally managed to crack through technical resistance at 1.5450 overnight rallying to an eventual three month high of 1.5520. Positive sentiment towards the state of the U.K economy and the European banking system continued to underpin the gains in the GBP ahead of the Bank of England Governor King’s testimony before the Treasury Select Committee in London on Wednesday where some supportive comments are likely to see continued demand for the Pound Sterling. This morning sees the GBP/USD open back slightly below the 1.5500 mark at 1.5485 however the GBP/AUD cross rate opens substantially lower than yesterdays Asian close of around 1.7250 at 1.7160 on the back of a higher Australian dollar.

- We expect a range today in the GBP/AUD rate of 1.7150 to 1.7275

:: New Zealand Dollar: The Kiwi dollar held firm during yesterday’s Asian session bouncing from 0.7250 to enter offshore exchange around the 73 cent level. It was a subdued European session with sellers ahead of 0.7320 capping any attempts at further advances. It took the announcement of a massive increase U.S New Home Sales to spark the markets bolstering risk appetite and the NZD/USD exchange rate. After popping through the sell orders at 0.7320 the Kiwi took out April highs to exchange around 0.7350, its highest level since January this year. Profit takers stepped in during late North American trade to trim some of the gains and see it open this morning around 0.7330.

- We expect a range today in the NZD/USD rate of 0.7285 to 0.7385

:: Majors: The Japanese Yen strengthened considerably during yesterday’s Asian session rallying to eventually retest recent lows at 86.80 against the Greenback overnight. The move began following the release of the June Merchandise Trade balance data which saw the adjusted surplus increase to 456 billion Yen, up a whopping 42.4% from the previous month. With European investors somewhat placated by the stress test results and a lack of Euro-Zone economic data EUR/USD searched for direction bouncing between 1.2890 and 1.2950 for the majority of the London trading day. The volatility increased however during the North American time-zone following the release of better than expected housing data for the month of June. New Home Sales beat forecasts for around 310k to come in at 330k, a whopping 23.6% increase from the previous months 276k result. Coupled with more gains on U.S equity markets the news inspired a fresh wave of EUR/USD demand taking it back to retest the 1.3 handle. This morning sees the big dollar opening at 1.2990 and 86.90 against the Euro and Yen respectively.

:: Data Releases:
AUD: May Conference Board Leading Index
NZD: No Data Expected Today
USD: Jul Consumer Confidence & Jul Richmond Fed Manufacturing Index
GBP: CBI Realised Sales
EUR: German Aug GfK Consumer Confidence Survey
JPY: Jun Corporate Service Price

:: Australian Dollar: Despite the uncertainty facing the European banking system the AUD/USD remained range bound on Friday bouncing between 0.8900 and 0.8970 for the majority of the Asian and offshore trading sessions. Adding support to the Aussie dollar was an increase in both the import and export price index during the second quarter, a sign that both the local and global economies are holding up relatively well. On the domestic front this week’s consumer and producer inflation reports remain the major highlight with the market expecting an increase in CPI above the top end of the RBA’s 2% to 3% band to put more upward pressure on interest rates.

- We expect a range today in the AUD/USD rate of 0.8900 to 0.9000

:: Great Britain Pound: The Pound Sterling rallied to its highest level since late April exchanging near 1.5450 against the Greenback during Friday’s London session with investors ignoring a decline in loans for house purchases focusing instead on the critical second quarter economic growth data. Gross Domestic Product or GDP as it’s referred to, rose a staggering 1.1% during Q2, up from 0.3% in Q1 taking the annual rate of growth to 1.6%. This morning sees the GBP open at 1.5410 and 1.7215 against the U.S and Australian dollars with today’s Australian PPI report expected to keep a lid on the cross in local trade.

- We expect a range today in the GBP/AUD rate of 1.7150 to 1.7275

:: New Zealand Dollar: The Kiwi rallied during early offshore trade jumping from 0.7235 to a high of 0.7290 against the Greenback. Better than expected German data triggered a wave of optimism heading into the release of the European bank stress test results taking the NZD higher. With the market somewhat disappointed by the results it then remained range bound between 0.7240 and 0.7290 for the remainder of Friday’s offshore session as another positive day on Wall Street provided some underlying support for the currency.

- We expect a range today in the NZD/USD rate of 0.7235 to 0.7300

:: Majors: In what was a volatile Friday session the Euro initially rallied from 1.2880 to a high of 1.2965 against the Greenback in early London trade following a much better than expected German IFO report. With no U.S economic data scheduled for release all eyes were on the release of the stress tests conducted on 91 European banks by the Committee of European Banking Supervisors. The committee announced that 7 banks had failed the tests with a combined shortfall of 3.5 billion EUR in funding required. As news trickled into the market EUR/USD sold off to a low of 1.2790 however investors questioned how stringent the tests were given they ignored the majority of the banks holdings of sovereign debt. European banks had already raised 220 billion EUR over the last 18 months and analysts had been expecting the tests to reveal a funding shortfall 10 to 20 times the 3.5 billion EUR. Another positive earnings session for corporate America lifted U.S equity markets with the Dow Jones Industrial finishing Friday’s session up 1% taking the week’s gains to 3.2%. The positive sentiment on Wall Street helped EUR/USD rebound as it opens in Asia this morning hovering around the 1.2900 handle whilst USD/JPY exchanges on its highs at 87.50.

:: Data Releases:
AUD: Q2 Producer Price Index
NZD: No Data Expected Today
USD: Jun New Home Sales
GBP: Jul Nationwide House Prices
EUR: No Data Expected Today
JPY: Jun Merchandise Trade Balance

:: Australian Dollar: After looking vulnerable to more downside in Asia yesterday the Aussie dollar found intraday support at 0.8735 going on to reverse its trajectory and rally during the European time-zone to retest what had been strong resistance around 0.8750. The move began on the back of positive European economic data and continued during North American trade eventually pushing through resistance to exchange above the 89 cent handle for the first time since mid May. Better than expected earnings results out of corporate America, comments from U.S Fed Chairman Bernanke and positive sentiment heading into the release of this evenings stress tests all conspired to boost risk appetite and equity markets which in turn spurred demand for the AUD/USD. This morning sees the AUD open around 0.8925 with only the second quarter import and export price index data scheduled for release.

- We expect a range today in the AUD/USD rate of 0.8850 to 0.8975

:: Great Britain Pound: The Pound Sterling bounced back overnight from an early London dip to 1.5150 exchanging within a whisker of the 1.5300 mark against the Greenback. Despite a slight reduction in June Retail Sales from +0.8% to +0.7% the result beat expectations of a larger drop to +0.5% proving there is some resilience in spending across the U.K. In addition to the consumer spending result stronger than forecast Euro-zone economic data and a rally on Wall Street improved sentiment towards the GBP/USD as it opens this morning exchanging at 1.5255 ahead of this evenings all important Q2 U.K GDP release. Despite the move higher against the Greenback the Pound Sterling opens lower against the Australian dollar at 1.7075 with demand for the AUD outstripping the GBP.

- We expect a range today in the GBP/AUD rate of 1.7000 to 1.7125

:: New Zealand Dollar: The Kiwi dollar drifted slightly lower during the Asian morning session yesterday dipping below the 71 cent level following a disappointing reading on the ANZ Consumer Confidence Index. The currency reversed in a big way however, rallying in afternoon and overnight trade to a high of 0.7270 against the Greenback. Demand for the high yielding NZD was spurred by optimism in Europe and the U.S and with risk appetite improving the Kiwi was highly sort after. The move comes ahead of next week’s RBNZ interest rate decision where rates are expected to rise again. This morning sees the NZD exchanging at 0.7245 and 1.2320 against the U.S and Australian dollars respectively.

- We expect a range today in the NZD/USD rate of 0.7185 to 0.7285

:: Majors: Stronger than expected European data gave the Euro a boost in overnight trade jumping from 1.2740 to an eventual high around 1.2930. Flash estimates on the Purchasing Managers Index for both the Manufacturing and Services sectors beat forecasts rising to 56.5 and 56.0 respectively. The value of goods produced by the manufacturing sector in May, as measured by the Industrial New Orders report, far exceeded economist predictions of a -0.1% reading to print at +3.8%. The Euro benefited from the results and with confidence high heading into this evening’s release of the European bank stress test results EUR/USD held on to its gains to open this morning at 1.2890 against the Greenback. On day two of his testimony U.S Fed Chairman Ben Bernanke stressed the need to maintain fiscal support by extending the tax cuts, comments which, along with some better than expected earnings results from corporate America helped the Dow Jones Industrial rally 2%. USD/JPY also benefited from the positive sentiment rallying from late Asian lows of 86.35 to a high of 87.20 opening this morning slightly below the 87 handle at 86.95. With all the focus on corporate earnings and the European situation the market seemingly ignored some less than impressive U.S economic data released overnight with weekly jobless rising and June leading index falling choosing instead to focus on improvements in existing home sales and the house price index.

:: Data Releases:
AUD: Q2 Import & Export Price Index
NZD: No Data Expected Today
USD: No Data Expected Today
GBP: Q2 GDP
EUR: German Jul IFO Report & Bank Stress test results
JPY: No Data Expected Today

:: Australian Dollar: The Australian Dollar opens lower against the greenback at 0.8780. The Aussie was supported around US88 cents during local trade yesterday by further talk of a rise in the official cash rate. The unit hit an intraday peak of 0.8840 after the Westpac Bank-Melbourne Institute leading index of economic activity rose 0.4 points in May, adding to the case for a rate rise, perhaps as soon as the next central bank policy meeting on August 3. During the offshore session the currency traded between a high of 0.8830 down to a low of 0.8760 after U.S. Federal Reserve chairman Ben Bernanke disappointed the market in his testimony to congress commenting that the economic outlook remains “unusually uncertain”.

- We expect a range today in the AUD/USD rate of 0.8740 to 0.8810

:: Great Britain Pound: Pound Sterling opens weaker against the greenback today at 1.5160 after the minutes of the Bank of England July meeting revealed consideration of further stimulus measures to underpin the U.K. economic recovery. Interest rates are already at a record low of 0.5 per cent. In overnight trade, sterling moved from a high of 1.5325 down to 1.5123 despite local equities snapping a five-day losing streak. Last week, the currency hit a 3-month high of 1.5472. Meanwhile, the pound opens steady against both the Australian Dollar (1.7250) and the New Zealand Dollar (2.1280).

- We expect a range today in the GBP/AUD rate of 1.7220 to 1.7315

:: New Zealand Dollar: The New Zealand Dollar opens lower today against the greenback at 0.7120. Visitor arrivals and a consumer credit expectations survey did little to inspire the kiwi yesterday, running out of puff around 0.7180. In the absence of any major economic data releases, the kiwi was supported during local trade after a positive session on the region’s equity markets. During overnight trade the unit moved down to a low of 0.7116 after U.S. Federal Reserve chairman Ben Bernanke disappointed the market in his testimony to congress commenting that the economic outlook remains “unusually uncertain”. Meanwhile, the kiwi opens lower against the Australian Dollar at 0.8100.

- We expect a range today in the NZD/USD rate of 0.7080 to 0.7160

:: Majors: After holding steady between 1.2880 and 1.2910 in Asia yesterday EUR/USD came to life overnight following U.S Fed Chairman Ben Bernanke’s testimony to the Senate Banking Panel. Leading into the commencement of the two day event investors had been expecting a relatively upbeat assessment on the state of the economy but were disappointed with the outcome on day one as he delivered a dovish presentation. Of particular interest to the market were comments surrounding the employment outlook where growth in private payrolls of around 100k a month would be “insufficient to reduce the unemployment rate materially” and that it would take a “significant amount of time” for the job market to return to levels seen in 2008. He watered down expectations of a fast paced recovery in economic growth and discussed at length how they would approach the exit of stimulus without much mention of any specific measures to boost growth. U.S equity markets took a dive finishing over 1% in the red and this weighed on risk sentiment sending EUR/USD lower to open this morning near its lows at 1.2750 whilst USD/JPY is also exchanging lower at 86.90. This evening sees the second day of Bernanke’s testimony and the release of the stress tests of 91 European banks which will take centre stage in the absence of any other more meaningful economic data.

:: Data Releases:
AUD: No data today
CAD: Retail Sales, May
EUR: German PMI Manufacturing & Services, July
GBP: Retail Sales, June
JPY: AllIndustry Activity Index, May
NZD: ANZ Consumer Confidence, July
USD: Existing Home Sales, Leading Indicators, June.

:: Australian Dollar: The Aussie sprung to life either side of the Reserve Bank release of the July board meeting minutes moving to an intraday high of 0.8745 before slipping back towards US87 cents. The central bank noted that “headline inflation was expected to rise” and, referring to consumer price data due out next Wednesday, “the important question for the board at the next meeting would be whether the new information materially changed the medium term outlook for inflation”. Traders interpreted the minutes as being less “hawkish” than expected which resulted in the Aussie losing some of its early momentum above US87 cents. The losses were short-lived however and the currency rallied to an overnight high of 0.8845 ahead of this morning’s opening level of 0.8830.

- We expect a range today in the AUD/USD rate of 0.8760 to 0.8865

:: Great Britain Pound: Pound Sterling opens lower against the greenback on Wednesday at 1.5260. During overnight trade, the pound retreated from a high of 1.5308 taking its lead from another soft session on UK equity markets which lost ground for the fifth straight trading day. Sterling hit an overnight low of 1.5152 as commodity-linked currencies rallied across the board on improved risk sentiment. As a result, the pound opens sharply lower against its antipodean rivals – 1.7270 against the Australian Dollar and 2.1285 versus the kiwi.

- We expect a range today in the GBP/AUD rate of 1.7220 to 1.7315

:: New Zealand Dollar: The New Zealand Dollar tracked higher against the Greenback during the Asian session as market participants climbed back aboard the “riskier asset train” with the Kiwi hitting a high of 0.7088. The NZ Dollar has gained back almost a full cent from the sell-off that occurred last Friday during US trade that saw the unit touch a low of 0.7030 on the back of massive market risk aversion. During the offshore session the New Zealand Dollar moved between US71 cents and a high of 0.7167. With no significant data out of New Zealand until next week (Monday - Trade Balance & Thursday - Reserve Bank of New Zealand’s interest rate decision and official statement) the dollar will take direction from offshore events.

- We expect a range today in the NZD/USD rate of 0.7120 to 0.7200

:: Majors: 24 hours out from US Federal Reserve Chairman Ben Bernanke’s semi-annual testimony to congress, the greenback moved higher against the Euro (1.2883) as markets speculate the tone of his speech may not be as bearish on the economy as first thought. U.S. equities eventually rallied after an early retreat which also saw the Euro fall from fresh two-month highs above 1.3000. The big dollar also rallied against the Japanese Yen to open on Wednesday in Sydney at 87.45. Meanwhile, the Bank of Canada, as was widely anticipated, raised interest rates by 25 basis points to 0.75 per cent. The move took the Canadian Dollar off 2-week lows to see the USD/CAD open at 1.0520.

:: Data Releases:
AUD: Westpac Leading Index, May
CAD: No data today
EUR: No data today
GBP: Bank of England minutes, July
JPY: No data today
NZD: Credit Card spending, June
USD: US Fed Chairman Benanke semi-annual testimony to senate panel

:: Australian Dollar: The Aussie dollar held onto support around 0.8750 in early offshore trade rallying back above the 88 cent handle on the back of gains in EUR/USD. The mood towards the commodity based currencies soured however in North American trade with risk aversion back on the table following a disappointing reading on the University of Michigan’s consumer sentiment survey and large losses on Wall Street. As a result the AUD/USD fell sharply to finish the week’s trade around the 87 cent handle with more downward pressure being applied in early Monday morning exchange the AUD/USD is currently trading at 0.8650. With no Australian economic data scheduled for release today it appears as though the AUD will remain heavy with the next level of technical support likely between 0.8620 and 0.8600.

- We expect a range today in the AUD/USD rate of 0.8620 to 0.8720

:: Great Britain Pound: The Pound Sterling begun Friday’s London session on a positive note pressing against 1.5450 in exchange with the Greenback. Once again the Bank of England’s board member Andrew Sentance was talking up the need for tighter monetary policy in the U.K. In an interview on BBC radio he said “If we can raise interest rates in a gradual way that will be helpful for the recovery because it will mean there won’t be a big shock to the business community.” Momentum changed however during the remainder of the offshore session with pessimism surrounding the long term global economic recovery resurfacing as North American equity markets fell, ending a two week rally. The GBP/USD opens substantially lower in Asia this morning exchanging back at 1.5280 whilst large falls in the Aussie dollar puts the GBP/AUD cross rate relatively unchanged at 1.7625.

- We expect a range today in the GBP/AUD rate of 1.7575 to 1.7725

:: New Zealand Dollar: After exchanging above the 73 cent handle on Friday the Kiwi traded 3.2% lower at 0.7070 in thin Monday morning trade. Fridays CPI announcement showed inflation in New Zealand increased a less than expected 0.3% during the second quarter taking the annual rate down from 2% to 1.8%. The news sent the NZD/USD lower immediately in Asia with offshore markets continuing to punish the Kiwi. Adding to the downside momentum in Europe and North America was poor consumer sentiment and large falls in U.S financial stocks with Citigroup and Bank of America amongst the largest names to finish in the red. With investors sensitive to more downside shocks the NZD/USD is likely to struggle to break back above short term technical resistance between 0.7125 and 0.7150 in Asia today.

- We expect a range today in the NZD/USD rate of 0.7025 to 0.7125

:: Majors: EUR/USD touched the psychological 1.3 level for the first time in over two months despite a massive blowout in the Euro-zone trade deficit. Economists had forecast for a relatively small deficit of around 0.5 billion with the 3.4 billion EUR result coming as a surprise. The Euro reversed earlier gains during the North American time-zone however with the release of U.S economic data. Headline Consumer Price Index or CPI as it is known fell 0.1% whilst the core figure which excludes the volatile food and energy components rose 0.2%, beating expectations of a 0.1% gain. It was the University of Michigan’s closely watched consumer sentiment index that caught the market by surprise though falling from 76 to 66.5 in a preliminary reading for the month of July. Risk aversion returned on the back of the announcement with lower than estimated sales reported by several big U.S financial institutions sending equity markets down 2.5% and adding to the EUR/USD selling. The big dollar finished the week at 1.2925 against the Euro and 86.70 against the Yen, the lowest level in USD/JPY since December last year.

:: Data Releases:
AUD: No Data Expected Today
NZD: No Data Expected Today
USD: Jul NAHB Housing Market Index & Fedspeak
GBP: Jul Rightmove House Prices
EUR: May Current Account & May Construction Output
JPY: No Data Expected Today

:: Australian Dollar: Hot on the heels of the FOMC downgrade of U.S GDP softer than expected Chinese data triggered a selloff of higher yielding Currencies in Asia as concerns over the potential slowdown in global growth resurfaced. Chinese Q2 GDP printed at 10.3% versus 10.5% forecast, down from 11.9% the previous quarter while retail sales slowed to 18.3%. The news weighed the Australian Dollar down to 0.8753 early offshore. In Europe the successful auction of Spanish debt sparked a rally in risk overnight. Traders continued to dump the Greenback following a surprise improvement in the number of jobless Americans. The Aussie opens today at 0.8835 US.

- We expect a range today in the AUD/USD rate of 0.8800 to 0.8875

:: Great Britain Pound: The Cable rallied overnight as investors focused on regional fundamental figures. The Pound broke past 1.5350 US during European trade following the successful auction of Spanish debt following Greece’s Success earlier in the week. The Sterling tightened it grasp in the Greenback rising above the 1.5450 handle on several occasions later in the evening after US economic data failed to deliver. The Pound opens at 1.5439 US, a level not seen since late April.

- We expect a range today in the GBP/AUD rate of 1.7350 to 1.7550

:: New Zealand Dollar: In Asia the New Zealand dollars fell on speculation ebbing growth in China will lead to diminished demand for exports from the South Pacific nations. Moving offshore risk sentiment improved following positive news from Europe and the Kiwi recovered its losses from earlier. An unexpected decline in US regional factory activity and a third straight month of decline in US producer prices initially hurt market sentiment causing the Kiwi to fall to 0.7173 US before rallying to overcome 0.7300. today the Kiwi starts the day buying 0.7270 USD.

- We expect a range today in the NZD/USD rate of 0.7180 to 0.7300

:: Majors: The Euro opens this morning buying 1.2935 US after rallying to new 2 month high of 1.2953 US overnight. Fears over the financing of Southern European debt eased following a robust Spanish bond auction where Spain was able to auction off nearly 3 billion in debt, attracting bids worth 2.57 times the securities offered. Later in the evening reports showing a slowdown in manufacturing in the New York and Philadelphia regions extended the Euro’s gains against the Greenback. Meanwhile the dovish view from US saw investors reshuffle portfolios unwinding USD assets while adding Yen. The USD/JPY opens this morning at 88.30.

:: Data Releases:
AUD: No Data Expected Today
NZD: Q2 CPI
USD: Jun CPI, May TIC Flows & Jul Prelim Uni of Michigan Confidence
GBP: No Data Expected Today
EUR: May Trade Balance
JPY: May Tertiary Index & BOJ Monthly Report

:: Australian Dollar: Consumer sentiment in Australia markedly improved rising to 11.1% the most in 13 months, following 3 months of decline. The Australian Dollar reached 2 month highs breaking past 0.8850 to touch 0.8870 against the Greenback offshore as investors grew hungry for riskier assets following gains in US stocks. Enthusiasm subsided following the release of the US Federal Reserve’s minutes which revealed downward revisions for growth. The Australian Dollar opens trade today at 0.8836 USD ahead of MI inflation expectations and motor vehicle sales.

- We expect a range today in the AUD/USD rate of 0.8770 to 0.8870

:: Great Britain Pound: Overnight the Pound climbed to its highest level against the US Dollar in over 2 months, just missing 1.5300 against the US dollar after unemployment declined more than expected. The number of claimants fell by 20,800 exceeding expectations of a 20,100 drop. This would make June the fifth consecutive month of declines in jobless claims, boosting speculation the economy may continue to strengthen as the government cuts spending. Combined with inflationary pressures, these bullish labour results should serve as a strong support for the more hawkish members of the Monetary Policy Committee. This morning the Sterling opens buying 1.5265 US and 1.7258 Aussie.

- We expect a range today in the GBP/AUD rate of 1.7150 to 1.7350

:: New Zealand Dollar: The Kiwi pared its losses offshore after softer NZ retail sales figures initially weighed down on the New Zealand Dollar. Core retail sales disappointed the market, which expected a 0.6% increase, declining 0.2% for April. Investor risk appetite improved offshore following gains in US equities which saw the Kiwi break 0.7250 US hitting a 2 month high. Underperforming US retail sales and a downward revision for growth by the US Fed pulled the Kiwi back, opening at 0.7233 USD this morning.

- We expect a range today in the NZD/USD rate of 0.7150 to 0.7250

:: Majors: The Euro spent much of its time trading tightly between 1.2695-1.2730 US price channel. Core consumer price index in the European Monetary Union printed according to expectations of 0.9%, doing little to inspire strength. Industrial Manufacturing in the region missed expectations slightly but stayed rather consistent at 0.9% growth. The euro climbed to more than a 2-month high of 1.2779 versus the US dollar from early low offshore of 1.2684 as U.S. stocks fluctuated amid speculation whether corporate profits will be strong enough to sustain the U.S. economic recovery. Hopes were soon dashed as risk aversion returned to the market as Federal Reserve minutes indicated increased risk to the economic recovery, discouraging investors from the riskier assets. The Yen advanced as investors sought safe havens in the aftermath. This morning the Euro and Yen open at 1.2739 and 88.25 US respectively.

:: Data Releases:
AUD: New Motor Vehicle Sales
CAD: No data slated for release
EUR: ECB Monthly Bulletin
GBP: Housing Equity Withdrawl Q/Q; MPC Members Miles speaks
JPY: BOJ Official Cash Rate Decision and Monetray Policy Statement
NZD: Business Manufacturing Index
USD: PPI m/m; Unemployment Claims; Empire State Manufacturing Index

:: Australian Dollar: The Australian Dollar climbed to its highest level in 3 weeks overnight as equities bounced upon expectations US corporate earnings will beat estimates. After initially falling to 0.8680 USD following Moody’s reduction of Portugal’s credit rating and concerns over China the Aussie rallied as risk appetite improved riding the positive wave from Europe. The outlook on commodity prices was upgraded following Alcoa Inc., the largest U.S. aluminium producer, reporting second-quarter sales and profit beating analysts’ estimates and forecasting higher global demand for the metal. Ahead of today’s Australian consumer sentiment report, the Australian Dollar opens at 0.8830 US.

- We expect a range today in the AUD/USD rate of 0.8775 to 0.8875

:: Great Britain Pound: The Pound rose against the US Dollar, breaking its 3 day losing streak, after British inflation figures exceeded expectations. Core inflation rose 3.1% defying economist estimations of 2.7% stoking speculation that the Bank of England may be forced to raise interest rates sooner than previously expected. Market sentiment continued to improve as the evening proceeded with the successful auction of Greek debt and indications US demand was picking up. The Cable gained as much as 1.5% overnight in the wake of these hot figures. This morning the Pound opens buying 1.5184 US and 1.7190 Aussie.

- We expect a range today in the GBP/AUD rate of 1.7100 to 1.7250

:: New Zealand Dollar: The Kiwi continued its 7 day climb up against the Greenback breaking 0.7200 US overnight. Gains in equities, spurred by Alcoa Inc’s sales and profit report, and Greece’s sale of debt encouraged investors to buy currencies related to economic growth. Increases in both internal and external demand by US consumers saw the US trade deficit unexpectedly widen in May to its highest level since November 2008 expanding 4.8% to US42.3 billion. The show of strengthen from global economy allows the Kiwi to open at 0.7193 against the US dollar ahead of today’s New Zealand housing and retail reports.

- We expect a range today in the NZD/USD rate of 0.7150 to 0.7220

:: Majors: The market consensus view that financing conditions in Southern European economies will remain challenging for the foreseeable future was reaffirmed by Moody’s who downgraded Portugal from AA2 to A1 bringing their ratings in line with S&P and Fitch. The move saw the Euro drop below the 1.2550 level reopening the issue of sovereign debt default. Germany’s ZEW economic sentiment report delivered a pessimistic view falling from 28.7 to 21.2 however the current conditions gauge significantly improved to 14.6 versus -7.9 in June. Encouraged by excess demand for Greek bonds the Euro pushed to a 2 month high against the greenback topping at 1.2737 US. Underpinning weakness in the Greenback was further widening in the U.S trade deficit and a return to risk with U.S equities rising putting the big dollar at 1.2725 and 88.70 against the Euro and Yen respectively.

:: Data Releases:
AUD: Jul Westpac Consumer Confidence
NZD: May Retail Sales
USD: Jun Retail Sales
GBP: Jun Claimant Count, Jun Jobless Claims & May ILO 3mth Unemployment Rate
EUR: Jun CPI & May Industrial Production
JPY: Commencement of BOJ meeting

:: Australian Dollar: Australia’s dollar fell from its highest level in almost three weeks on a drop in imports of iron ore and copper by China, the nation’s biggest trading partner. A rise in home loan approvals for the first time in eight months allowed the Aussie to regain most of its early morning losses. The improvement suggested Governor Glenn Stevens may have the scope to resume aggressive monetary measures to quell rising inflationary pressures. However the DPJ’s staggering political loss sent the Australian dollar down to 0.8700 US. Offshore the Aussie staged a comeback reversing its losses as investor risk appetite improved. This morning the Aussie opens buying 0.8773 USD.

- We expect a range today in the AUD/USD rate of 0.8720 to 0.8800

:: Great Britain Pound: The Sterling fell early offshore to 1.4948 against the Greenback, its lowest level in almost 2 weeks after S&P confirmed it would maintain its negative outlook on Britain’s AAA rating. Overnight the nation’s Current Account was reported to be in the red by more than 9.6 billion Pounds, doubling market expectations. However GDP was on the mark at 0.3% while services surprised jumping 0.6% from a previous result of 0.2%, exceeding a general market consensus of 0.4% improvement. The Pound recovered to 1.5085 US as speculation mounted about a takeover bid for BP Plc after the U.S. government reportedly gave Exxon Mobil the green light to look at a bid for the UK oil producer. This morning the Pound opens at 1.5026 against the Greenback and 1.7150 Aussie.

- We expect a range today in the GBP/AUD rate of 1.7100 to 1.7200

:: New Zealand Dollar: The Kiwi survived an early London sell-off bouncing back from its overnight lows around 0.7055 to open this morning on its highs around 0.7130. With little in the way of economic data released overnight the Kiwi put in a strong performance considering the relative strength of the Greenback against the majors. This morning’s June N.Z Food Price data which is an important component of CPI will be closely watched with the market looking for a recovery back into positive territory from the previous months -0.7% result. The late rally in the NZD/USD puts the AUD/NZD cross rate lower exchanging marginally below 1.2300 this morning.

- We expect a range today in the NZD/USD rate of 0.7075 to 0.7175

:: Majors: The Japanese Yen fell in the wake of a much larger than expected loss by the ruling Democratic Party of Japan in the country’s Upper House elections. The DPJ was only able to secure 44 seats, less than 40%, of the 121 contested. The loss makes it highly unlikely Prime Minister Naoto Kan’s proposed consumption tax intended to curtail some of the budget deficit is unlikely to pass in the foreseeable future. Amid the political turmoil the USD/JPY rose above 89.00 during Asia before dipping back into the mid 88.00s offshore. Meanwhile the Euro slid to an intra-day low of 1.2550 US early offshore as investors grew more concerned about the transparency of the information that will be released from the stress tests after a confidential letter from the EU’s executive arm revealed “There is considerable opposition to the publication of individual exposures to sovereign debt.” This morning the Euro opens buying 1.2590 US while the Greenback/Yen cross opens at 88.63 US.

:: Data Releases:
AUD: Jun NAB Business Confidence
NZD: Jun Food Prices
USD: May Trade Balance
GBP: Jun CPI & Jun RPI
EUR: Jul ZEW Survey & Jun German Wholesale Price Index
JPY: May Industrial Production, May Capacity Utilisation & Jun Consumer Confidence

:: Australian Dollar: The Aussie dollar traded within a 50 point range between 0.8725 and 0.8775 for the majority of Friday’s offshore session and opens this morning towards the top end at 0.8770. Japanese elections, developments in Europe and a strong close in U.S equities dominated currency flows heading into the weekend with a soft Yen holding the AUD/USD back from a clear break through 0.8780. Australian May Home Loan and Investment Lending data is scheduled for release today with several sentiment surveys also on the horizon for the Aussie dollar this week. On the technical front momentum seems to be building for an eventual break above the psychological 88 cent level however the major chart resistance appears to be around 0.8850 which will prove critical to the longer term strength of the current rally.

- We expect a range today in the AUD/USD rate of 0.8720 to 0.8800

:: Great Britain Pound: The Pound Sterling fell sharply on Friday dropping from 1.5200 to open this morning on its lows at 1.5055 against the Greenback. Disappointing U.K data in the form of a larger than forecast widening in the Total Trade Balance from 3.5 to 3.8 billion GBP and lower than expected Producer Prices triggered the move out of the Pound with this evenings GDP and Current Account also likely to fall short of expectations. With the Aussie dollar tracking sideways the Pound weakness puts the GBP/AUD cross rate lower this morning well down from early London highs near 1.74 exchanging at 1.7155.

- We expect a range today in the GBP/AUD rate of 1.7100 to 1.7250

:: New Zealand Dollar: The Kiwi tracked movements on the Aussie dollar during Friday’s offshore session bouncing between support at 0.7060 and resistance at 0.7110. With a distinct lack of any meaningful European or U.S economic data it was weakness in the Pound Sterling and the Japanese Yen that dictated demand for the Greenback and the Kiwi as a by product. This morning sees the NZD open towards the top end of the range at 0.7105 against the Greenback and 1.2330 Australian dollars, down from Friday’s peak at 1.2380 Aussie.

- We expect a range today in the NZD/USD rate of 0.7050 to 0.7125

:: Majors: The Euro rallied during late Asia on Friday to post a high around 1.2720 before paring back gains to finish the week at 1.2640. With a lack of any market moving European economic data direction for currency markets came from weakness in the Japanese Yen ahead of the weekends elections where it was expected that the Democratic Party of Japan would lose its control of the upper house. The Yen weakness saw USD/JPY bounce from its lows at 88.35 to finish near 88.70 with demand for the Greenback increasing following better than expected U.S Wholesale Inventory data for the month of May. The biggest mover however was USD/CAD which shed over a cent dropping from a high of 1.0450 to 1.0295 after the announcement that the Canadian economy added 93.2k jobs in June, well above economist forecasts for a rise of around 20k taking the unemployment rate down from 8.1% to 7.9%.

:: Data Releases:
AUD: May Home Loans & May Investment Lending
NZD: No Data Expected Today
USD: Fedspeak
GBP: Q1 Final GDP & Q1 Current Account
EUR: No Data Expected Today
JPY: Jun Domestic Corporate Goods Price Index

:: Australian Dollar: Strong jobs data sent the Australian Dollar soaring above US87 cents yesterday. A total of 45,900 positions were created in June pushing the unemployment rate down to 5.1 per cent and reviving the prospect of another rise in official interest rates, possibly as early as next month. The Aussie hit an intraday high of 0.8740 shortly after the report and continues to attract buying interest on the back of improved risk sentiment and our yield advantage. During the offshore session, the unit moved between 0.8690 and a high of 0.8790 as the greenback weakened against several major currencies. On the cross rates, the Aussie is higher against the New Zealand Dollar at 1.2355.

- We expect a range today in the AUD/USD rate of 0.8720 to 0.8800

:: Great Britain Pound: As expected, the Bank of England has kept its key interest rate unchanged at a record low of 0.5 per cent. Pound Sterling opens marginally lower today at 1.5160 after a report on Thursday revealed UK house prices fell 0.6 per cent in June. Soft economic data may underpin the central bank’s commitment to retain the current levels of monetary stimulus which is likely to keep a lid on the pound over the near term. Meanwhile, the pound opens lower against both the Australian Dollar (1.7280) and the New Zealand Dollar (2.1360).

- We expect a range today in the GBP/AUD rate of 1.7240 to 1.7340

:: New Zealand Dollar: The New Zealand Dollar opens higher against its US counterpart today at 0.7090. During the local session the kiwi received a boost and briefly tracked the Australian Dollar after stronger-than-expected employment data across the Tasman. However, the gains were short-lived as there is strong technical resistance around the US71 cent mark. During the offshore session, the unit moved between a low of 0.7035 up to a high of 0.7102 on the back of improved risk sentiment after the IMF raised its outlook for global economic growth.

- We expect a range today in the NZD/USD rate of 0.7040 to 0.7105

:: Majors: The Euro hit fresh two-month highs overnight above 1.2700 after European Central Bank (ECB) president Mr Jean-Claude Trichet made positive comments about the economy. Risk appetite returned after Mr Trichet said “indicators suggest that a strengthening in economic activity took place during the spring”. As expected, the ECB kept interest rates on hold at 1 per cent. Meanwhile, the Japanese Yen is weaker across the board after the IMF raised its outlook for global growth, reducing the need for a safe haven. The big dollar opens at 88.29 against the Yen after a bigger-than-expected fall in weekly jobless claims. However, the jobless report also revealed that unemployment will be slow to decline.

:: Data Releases:
AUD: No data today
CAD: Housing Starts, June
EUR: No data today
GBP: Producer Prices, June
JPY: No data today
NZD: No data today
USD: Wholesale Inventories, May

:: Australian Dollar: Traders were content to “play the ranges” between 0.8470 and 0.8510 during yesterday’s domestic session in light of the sharp rally above US85 cents the previous day. In offshore trade, the unit came to life and surged higher above US86.50 cents on the back of improved risk sentiment and a weaker greenback across the board. On the economic front, local unemployment data is due for release this morning at 11:30 AEST, with a slight slowdown expected in the number of new positions. Should the amount of full-time jobs exceed expectations, the Aussie is likely to build on the solid gains of the past couple of days. We open on Thursday at 0.8630.

- We expect a range today in the AUD/USD rate of 0.8575 to 0.8690

:: Great Britain Pound: Pound Sterling opens higher today against its US counterpart at 1.5188 and was buoyed overnight after another positive session for UK equities. In overnight trade the pound moved between a low of 1.5080 before nudging two-month highs at 1.5218 as the greenback weakened across the board. Tonight, the Bank of England is expected to leave interest rates on hold at 0.5 per cent and is also widely tipped to hold its asset-purchase program at GBP200bio. Meanwhile, the pound has been outperformed by its antipodean rivals and opens lower against both the Australian Dollar (1.7570) and the New Zealand Dollar (2.1590)

- We expect a range today in the GBP/AUD rate of 1.7520 to 1.7820

:: New Zealand Dollar: The New Zealand Dollar opens sharply higher today at 0.7025 against its U.S. counterpart. In the absence of any local economic data releases, trade during yesterday’s domestic session saw the kiwi move between a low of 0.6905 and a high of 0.6945. Greenback weakness pushed the currency higher hitting an offshore peak of 0.7050. Improved risk sentiment and movements in global equity markets are likely to be the main drivers of the local unit for the remainder of the week. The kiwi is steady against its trans-Tasman rival at 0.8125.

- We expect a range today in the NZD/USD rate of 0.6980 to 0.7080

:: Majors: The Euro opens marginally higher at 1.2642, eclipsing recent seven-week highs, for an overnight zenith of 1.2664 as the greenback weakened across the board. However, the 16-nation currency is likely to run into resistance in the near term as the Euro zone sovereign debt situation which has plagued the currency this year, is yet to be fully resolved. The European Central Bank meets tonight and is strongly expected to leave interest rates on hold at 1 per cent. Meanwhile, the greenback opens largely unchanged against the Japanese Yen at 87.60.

:: Data Releases:
AUD: Unemployment rate, June
CAD: New House Prices, May
EUR: ECB Interest Rates
GBP: BoE Interest Rates; Industrial Production, May
JPY: Current Account, Machinery Orders, May
NZD: No data today
USD: Initial jobless claims (W/E July 3); Consumer Credit, May

:: Australian Dollar: As expected, the Reserve Bank of Australia (RBA) left interest rates on hold at 4.5 per cent. In the accompanying statement, RBA governor Mr Glenn Stevens noted that whilst underlying inflation is likely to be “in the upper half of the target zone over the next year”, current policy settings were described as “appropriate”. Meanwhile, in economic data announced earlier in the session, Australia posted its third-highest trade surplus in May of A$1.65bio on continued strong demand from China and India. The currency rallied from 3-week lows (0.8317) after the data. The Aussie opens sharply higher on Wednesday against the greenback at 0.8500, buoyed by the afore-mentioned strong economic data and positive risk sentiment throughout much of the offshore session.

- We expect a range today in the AUD/USD rate of 0.8440 to 0.8590

:: Great Britain Pound: Pound Sterling opens marginally higher today against the greenback at 1.5145. In the absence of any local economic data, the currency moved between a low of 1.2479 before nudging a two-month high at 1.2661, buoyed by a sharp rally in U.K equities, led largely by the resources sector. Traders were reluctant to take the pound any higher at this stage as the market are looking towards tomorrow’s interest rate decision by the Bank of England and any accompanying statement. Meanwhile, the pound has lost ground against both the Australian Dollar (1.7780) and the New Zealand Dollar (2.1840).

- We expect a range today in the GBP/AUD rate of 1.7720 to 1.7830

:: New Zealand Dollar: The New Zealand Dollar drifted lower in local trade after the release of the NZ Institute of Economic Research quarterly survey of business opinion. The June quarter report revealed a drop in optimism and activity across all sectors of the economy suggesting to market participants the Reserve Bank of New Zealand may need to stop raising interest rates. The kiwi hit an intraday low of 0.6825. During offshore trade, the kiwi moved between a low of 0.6880 up to a high of 0.6974 as the greenback weakened across the board. The kiwi has been outperformed by the Australian Dollar overnight which sees the NZD/AUD cross rate open at 0.8135.

- We expect a range today in the NZD/USD rate of 0.6880 to 0.6975

:: Majors: In further evidence of the slow pace of economic recovery in the United States, the Institute for Supply Management’s (ISM) index of the services sector fell to a four-month low in June at 53.8. The greenback weakened across the board which saw the Euro nudge a seven-week high at 1.2661. Sharp rallies in European equity markets also provided support for the 16-nation currency ahead of Thursday’s interest rate announcement by the ECB and tonight’s first quarter growth data. Meanwhile, the greenback remains under pressure against the Japanese Yen opening marginally lower today at 87.47. The 24-hour range was a fairly subdued 87.33 – 87.92.

:: Data Releases:
AUD: No data today
CAD: Ivey PMI, June
EUR: EZ GDP, Q1; German factory orders, May
GBP: No data today
JPY: No data today
NZD: No data today
USD: No data today

:: Australian Dollar: The Australian Dollar opens lower on Tuesday at 0.8390 ahead of today’s monthly board meeting of the Reserve Bank of Australia (RBA). The Aussie received a boost during yesterday’s local session after the TD-Securities/Melbourne Institute inflation gauge rose 0.3 per cent in June for an annual reading of 3.6 per cent. Whilst official consumer price data is not scheduled for release until later this month, today’s reading suggested to the market that the RBA may raise rates in the future to restrain price growth. Most economists however, expect the RBA to sit tight on rates today. In subdued overnight trade owing to a U.S. public holiday, the Aussie drifted to a 24-hour low of 0.8370.

- We expect a range today in the AUD/USD rate of 0.8340 to 0.8440

:: Great Britain Pound: For the first time in three sessions, the pound opens lower against the greenback at 1.5125. Investors sold the currency down from recent two-month highs on speculation that government plans to cut spending is likely to contain economic growth. In overnight trade, the pound moved in a tight range between 1.2508 and a high of 1.2563. In local economic data, a gauge of service companies fell to 54.4 in June from 55.4 in May. Meanwhile, the pound opens marginally lower against both the Australian Dollar (1.8022) and the New Zealand Dollar (2.1978).

- We expect a range today in the GBP/AUD rate of 1.7980 to 1.8080

:: New Zealand Dollar: The New Zealand Dollar opens lower today against the greenback at 0.6885. In the absence of any local economic data on Tuesday, the kiwi drifted in line with the Australian Dollar between 0.6850 and 0.6900 throughout most of the domestic session. U.S. Markets were closed overnight for Independence Day celebrations restricting ranges compared to recent standards with the kiwi trading between a high of 0.6939 down to the afore-mentioned 0.6850 during the offshore session. On the cross rates, the kiwi opens marginally higher against the Australian Dollar at 0.8190.

- We expect a range today in the NZD/USD rate of 0.6850 to 0.6935

:: Majors: The Euro has retreated from the recent six-week highs above 1.2600 to open on Tuesday at 1.2530. Investors sold the 16-nation currency on speculation the European Central Bank will keep interest rates on hold at 1 per cent when policy-makers meet this Thursday. Softer-than-expected Euro Zone economic data also kept a lid on the currency with the purchasing managers index for services & manufacturing slumping to 56 in May. European retail sales rose just 0.2 per cent in May. Meanwhile, in quiet trade owing to a public holiday in the United States, the greenback opens steady against the Japanese Yen at 87.77.

:: Data Releases:
AUD: Trade Balance, May; RBA Interest Rate Decision
CAD: Building Permits, May
EUR: No data today
GBP: No data today
JPY: Leading Index, June
NZD: NZIER Business Opinion Survey Q2
USD: No data today

:: Australian Dollar: The AUD/USD bounced from intraday support at 0.8465 on two occasions during early morning exchange yesterday rallying during the afternoon session to enter offshore trade edging towards 0.8550. The move came despite a large 6.4% drop in HIA New Home Sales during the month of May with the local market focusing instead on slightly higher private sector credit growth. Positive sentiment in Europe gave it a nudge through 0.8550 however the move was short lived with concerns about stalling jobs growth out of North America escalating, putting another dent in the markets confidence on the sustainability of a global economic recovery. Support at 0.8465 gave way during the U.S time-zone sending the Aussie dollar to this morning’s open of 84 cents with today’s Australian Retail Sales and Building Approval data releases to be closely scrutinised by the markets.

- We expect a range today in the AUD/USD rate of 0.8330 to 0.8480

:: Great Britain Pound: After valiantly holding on to support ahead of 1.5 the Cable finally gave way to a flurry of selling overnight. A drop in U.K consumer confidence to a six month low and disappointing Nationwide House Price data started the move. Seasonally adjusted June housing figures rose a meagre 0.1%, down from 0.5% the previous month and below economist forecasts for a decline to 0.3%. Concern about U.S jobs growth following a lower than predicted ADP employment report fuelled another round of risk aversion which saw an increase in demand for the Greenback sending GBP/USD lower to open this morning on its lows at 1.4940. The GBP/AUD cross rate remains volatile after dropping from yesterday’s highs around 1.7775 to an overnight low near 1.7550 it opens this morning back on its highs at 1.7775 thanks mainly to a lower Aussie dollar.

- We expect a range today in the GBP/AUD rate of 1.7650 to 1.7825

:: New Zealand Dollar: After consolidating between 0.6910 and 0.6940 for the majority of the Asian session yesterday the Kiwi rejected European attempts to advance through 0.6950 to open this morning a cent lower at 0.6850 against the Greenback. Sentiment towards the NZD changed following the U.S ADP employment report with the lower than predicted result forcing some downward revisions to Friday’s U.S payroll report and economic growth in general. With only second tier local data in the form of the June ANZ Commodity Price index scheduled for release today direction for the NZD is likely to come from developments across the Tasman, in Europe and North America as key economic data is release on Thursday and Friday.

- We expect a range today in the NZD/USD rate of 0.6785 to 0.6900

:: Majors: The Euro rallied in early offshore trade last night buoyed by lower than expected demand for short term funding from the ECB. The central bank allocated 132 billion EUR in 3 month funding to banks across Europe, well below expectations that they may have needed up to 250 billion. With the news that European banks were able to finance debt from money markets risk appetite improved sending EUR/USD up from 1.2210 to an eventual high around 1.2300. June Euro-zone CPI estimates then came in at 1.4%, down from 1.6% the previous month and slightly below forecasts for a result of 1.5% capping the move. A weaker than expected ADP employment report out of North America, only 13k jobs added against forecasts for around 60k, along with trepidation ahead of this evenings ECB announcement on 12 month bank loan maturities then renewed selling interest. Following the U.S data EUR/USD pared back earlier gains and opens this morning back at 1.2230 whilst USD/JPY opens near its lows at 88.40, marginally down from yesterday’s Asian close at 88.65.

:: Data Releases:
AUD: May Retail Sales & May Building Approvals
NZD: Jun ANZ Commodity Prices
USD: Jun ISM, May Construction Spending, May Pending Home Sales & Weekly Jobless Claims
GBP: Jun PMI Manufacturing
EUR: Jun PMI & German May Retail Sales
JPY: Q2 Tankan Survey