:: Australian Dollar: The local market was left in awe of what many have called the miracle economy and the 0.4% increase in economic growth during the first quarter of the year in Australia. Only a few days ago it seemed inevitable that Q1 GDP would confirm the second successive quarter of negative economic growth and a technical recession just like many of the other industrialised nations around the world. The initial reaction to the data saw the AUD jump from 0.8180 to eventually break through technical resistance at 0.8250 and exchange as high as 0.8260 in early offshore trade. In stark contrast to the previous few sessions the AUD/USD opens substantially lower this morning exchanging at around 80 cents after having capitulated to trade as low as 0.7930 overnight. With a reality check coming in the form of sombre U.S economic data risk aversion returned as equities, commodities and the Aussie dollar all traded in the red.

- We expect a range today in the AUD/USD rate of 0.7920 to 0.8080

:: Great Britain Pound: The good news for the U.K economy continued overnight with an unexpected increase in the Purchasing Managers Index for the construction industry coupled with a rise in Consumer Confidence during the month of May. This sparked an initial rally in the Pound Sterling to an early London high of 1.6660 however the trend reversed quickly as investors took profit and flocked back to what had been an abandoned and unloved Greenback. Heading into the Bank of England meeting tonight the cable opens this morning substantially lower at 1.6300 with the “green shots” recovery story coming under question. Despite the large fall in the GBP for those looking to convert Pounds into Australian dollars the rate opens higher this morning at 2.0370 thanks to a large fall in the AUD.

- We expect a range today in the GBP/AUD rate of 2.0250 to 2.0450

:: New Zealand Dollar: After posting a high of 0.6560 in early trade yesterday the Kiwi dollar held on to a tight range in Asia exchanging between 0.6520 and 0.6550 for the majority of the session. In offshore trade it was quite a different story with investors flocking back to the safety of the Greenback as equities and commodities posted large losses sending the NZD into free fall. The main catalyst for the move was nervousness surrounding the U.S ADP employment report which showed a larger than expected number of job losses ahead of Friday's payroll data. This morning sees the NZD/USD open at 0.6325 after exchanging as low as 0.6270 overnight whilst the AUD/NZD cross rate opens at 1.2620.

- We expect a range today in the NZD/USD rate of 0.6250 to 0.6380

:: Majors: The Euro began the offshore session on a positive note with PMI for the services sector improving during the month of May taking EUR/USD to a high of 1.4337 in early exchange. Investors however were caught by surprise with the swiftness of the move that followed with EUR/USD plummeting to an overnight low near 1.4100. There were several reasons for the sharp reversal the first of which came in the form of a larger than expected fall in first quarter GDP number for the Euro-zone which was followed by a higher than forecast drop in U.S employment as measured by the ADP employment report. With the U.S economic recovery story hitting a snag risk appetite disappeared and traders took profits on in the money positions indiscriminately buying back the U.S dollar against all the majors. Adding momentum to the move was a Reuters report that indicated Asian countries willingness to continue to buy USD denominated assets even if the countries credit rating was downgraded. The big dollar also experienced some gains against the Japanese Yen climbing to a high of 96.40 before pulling back to settle around 96.00 in late New York trade. The markets will now look towards tonight's ECB and BoE meetings where rates are not expected to change with the ensuing rhetoric to be closely scrutinised.

:: Data Releases:

  • AUD: Apr Trade Balance
  • NZD: No Data Expected today
  • USD: Q1 Unit Labour Costs
  • GBP: BoE Rate Decision
  • EUR: ECB Rate Decision & Apr Retail Sales
  • JPY: Q1 Capital Spending
  • CAD: BoC Rate Decision, Apr Building Permits & May Ivey PMI