Australia: The AUD has opened lower this morning currently trading around USD0.8765 as profit taking entered the market following the announcement from the Chinese central bank regarding the Chinese Yuan. Over the weekend it was announced that the central bank would allow the fixed currency to be more flexible, and on the back of that we saw riskier currencies such as the AUD rise. Since then there has not been much more news on the subject, or action from the central bank, so we’ve seen investors seize the opportunity to take some profits. US equity markets were down late during the offshore session after a retreat in retail and technology stocks reduced the initial 100 point rise. The DOW finished down 0.1% to 10442. With a lack of top tier data due out during our trading session today and also overnight it is expected that the AUD will hold in a narrow range.
Majors: Investors also wound down their riskier positions overnight as one of France’s largest banks had its credit rating downgraded and comments were made regarding the UK’s Budget, which is due to be handed down tonight. Fitch downgraded the French investment bank BNP Paribas to AA- from AA citing that there were structural issues within the bank. This news threatened to knock the EUR/USD below USD1.2300 which prior to the announcement was trading around USD1.2500; almost a 6 week high, after the news regarding the Yuan had strengthened the currency. A former Bank of England official last night said that the UK’s budget “looks certain” to push the UK into recession. This is the first major hurdle for the new government, so many will be interested to see how they manage to pull the economy through its current fragile state. On the back of the comments the GBP/USD opened this morning lower at USD1.4750.