Money and Forex Blog

:: Australian Dollar: The Australian Dollar traded in a narrow range during Asia yesterday unaffected by the release of the RBA's minutes and entered London around what is becoming a familiar 0.9450 handle. Quiet trading continued throughout Europe as investors awaited the much anticipated Interest Rate announcement and accompanying FOMC Statement. Leaving interest rates on hold at 0.25% as expected, the US Federal Reserve recognised the sluggish economic recovery and indicated its willingness to increase quantative easing measures in order to keep long term interest rates under control, gradually return inflation to desired levels and support the job market. Along with an unexpected rise in US Housing Starts, Bernanke's comments kept investors happy and the AUD jumped 1 cent to a new high slightly above 0.9550. Consolidating around 0.9535 we look to a quiet day ahead on the news front with just the Melbourne Institute's Leading Index Data being released this morning.

- We expect a range today in the AUD/USD rate of 0.9485 to 0.9585

:: Great Britain Pound: A massive rise in U.K Public Sector Net Borrowing from 2 billion to 15.3 billion pounds saw GBP/USD initially fall from 1.5580 to test the 1.5500 level with support holding firm throughout the European session. The Pound came to life however during North American exchange rallying towards 1.5650 following the FOMC meeting and broad based USD weakness. This morning sees the GBP trading at 1.5605 and 1.6365 against the USD and AUD ahead of the release of the Bank of England Minutes this evening.

- We expect a range today in the GBP/AUD rate of 1.6320 to 1.6450

:: New Zealand Dollar: The Kiwi remained range bound in Asia yesterday bouncing between 0.7270 and 0.7290 for the majority of the trading day. The theme continued throughout the European session before jumping through resistance around the 73 cent handle to test the critical 0.7350 level on two occasions. The catalyst for the move higher was news that the U.S Federal Reserve Bank stands at the ready to expand QE in order to halt job losses and spur economic growth in the region. This morning sees the NZD/USD trading at around 0.7325 ahead of the release of second quarter N.Z Current Account data which is expected to show a turnaround from a surplus to a deficit.

- We expect a range today in the NZD/USD rate of 0.7275 to 0.7350

:: Majors: European investors breathed a sigh of relief overnight with the Irish bond auction five times oversubscribed at a slightly lower yield of 6.4%. There was some concern that the government would struggle to get the necessary refinancing however with demand strong the Euro firmed from 1.3060 to hover around 1.3130 for the majority of the European session. The big news overnight was the conclusion of the U.S Federal Reserve Bank meeting with the central bank using strong rhetoric in its accompanying statement. In particular the Fed said it was "prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate". A clear signal that it is ready to increase QE and that spurring high inflation as a consequence is not a concern. The news overshadowed U.S Housing data with the Greenback weakening immediately after the release falling to 1.3275 versus the Euro, its highest level since the 9th of August approaching important technical resistance at 1.3325. USD/JPY lost ground as well momentarily dipping back below the 85 handle to open this morning at 85.13 whilst EUR/USD opens at 1.3255.

:: Data Releases:

• AUD: Jul Leading Index
• NZD: Q2 Current Account
• USD: Jul House Price Index
• GBP: BoE Minutes
• EUR: Jul Industrial New Orders
• JPY: Jul All Industry Activity Index & BoJ Speak