:: 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

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