:: Australian Dollar: For the second time in nine months the Reserve Bank of Australia left rates unchanged at 4.5% as expected and the Aussie fell as the RBA signalled policy makers may keep borrowing costs steady as ‘the effects of earlier expansionary policy measures will be diminishing.’ In other Australian economic data released yesterday building approvals declined 14.8%, the most in over two years whilst Retail Sales increased a more than expected 0.6%. The Chinese manufacturing sector as measured by the PMI survey dropped to 53.9 sparking a wave of risk aversion over concerns of a slowdown in global economic activity. After opening above 0.8450, the Aussie traded down to 0.8280 in early offshore exchange before recovering briefly after US manufacturing figures printed above expectations. This morning the Australian Dollar opens lower at 0.8287 US dollars.

- We expect a range today in the AUD/USD rate of 0.8250 to 0.8400

:: Great Britain Pound: The Pound opens this morning buying 1.4640 US dollars after UK manufacturing PMI held steady at 58.0 beating market expectations of a drop to 57.8. A report also showed UK housing prices had their biggest annual gain in more than two and a half years in April. The Pound rallied offshore breaking above 1.4700 US dollars as UK insurer Prudential Plc’s bid to take over American International Group Inc’s main Asian unit failed, preventing the outflow of $35.5 billion from the UK. Meanwhile the Sterling opens higher against the Aussie and Kiwi at 1.7650 and 2.1700 respectively.

- We expect a range today in the GBP/AUD rate of 1.7450 to 1.7700

:: New Zealand Dollar: The Kiwi continued its downward trend as fresh concerns over the health of the global economy flared when China reported a decline in manufacturing. The Kiwi felt to 0.6700 against the Greenback offshore as the European Central Bank warned that EU banks face up to 195 billion Euros in a second wave of potential loan losses over the next 18 months due to the financial crisis. Better than expected US data saw the Kiwi hold up around 0.6800 however support eventually gave way to send the NZD/USD back to this morning’s open around 0.6750.

- We expect a range today in the NZD/USD rate of 0.6700 to 0.6850

:: Majors: Risk appetite took a hit in Asia yesterday following the release of weaker than expected Chinese manufacturing data. The trend continued in early offshore exchange with EUR/USD trading as low as 1.2110, its lowest level since April 2006. The Euro found some support rallying back above 1.2300 following a decrease in German unemployment during May as the number of people out of work declined a seasonally adjusted 45k, well above analyst forecasts of around 18k. Demand for the Greenback re-emerged as data out of the U.S saw the manufacturing sector hold up better than expected and construction spending rise 2.7% in April, well above forecasts of a modest 0.1% rise. This morning sees the big dollar open at 1.2225 against the Euro and 90.95 Yen with the head of the German central bank Weber speaking this evening sure to keep the Euro volatile. In other news the Bank of Canada became the first of the G7 nations to increase interest rates since the recession although the 0.25% rise to 0.5% could be the first and last for some time. The accompanying rhetoric suggested rates could remain at 0.5% for some time “Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments”, a very cautious statement indeed. USD/CAD traded within a wide range between 1.0420 and 1.0560 throughout the session with the CAD relinquishing its initial gains following the announcement once the market had digested the statement.

:: Data Releases: AUD: Q1 GDP NZD: May ANZ Commodity Price Index USD: Apr Pending Home Sales GBP: May Construction PMI & Apr Net Mortgage Approvals EUR: Apr PPI JPY: May Monetary Base