:: 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