Daily Forex Forecast 20/01/2010

- We expect a range today in the AUD/USD rate of 0.9200 to 0.9280

:: Great Britain Pound: Volatility in the Cable continued overnight following higher than expected Consumer and Retail price data. CPI for the month of December exceeded analyst forecasts for a 0.3% result increasing 0.6% for the month taking the annual headline rate up from 1.9% to 2.9%. The news added support to the GBP/USD in early offshore exchange, rallying from around 1.6400 to a high above 1.6450 shortly after the announcement. The move proved to be short lived however as concerns over the prospects for the broader European region outweighed any of the benefit and as a consequence the Pound Sterling opens this morning back at 1.6365 in trade with the Greenback. The GBP/AUD cross rate pared back early London gains that saw it momentarily exchange above 1.7800 to open this morning near its lows at 1.7710.

- We expect a range today in the GBP/AUD rate of 1.7650 to 1.7800

:: New Zealand Dollar: The Kiwi dollar retested support at 0.7330 overnight initially falling following the release of poor European economic sentiment data and the disappearance of risk appetite as a consequence. Both the AUD and NZD staged remarkable comebacks from their lows against the USD with the NZD/USD opening this morning back at 0.7385 and the AUD/NZD cross rate unchanged around 1.2500 once again. Volatility in the Kiwi is expected to increase in Asia today with the release of fourth quarter N.Z consumer price inflation data that has economists forecasting a relatively flat increase for the quarter and a rise from 1.7% to 2.1% for the year to date.

- We expect a range today in the NZD/USD rate of 0.7350 to 0.7450

:: Majors: Disappointing European data in the form of the ZEW Institute's sentiment survey and fears of widespread fiscal deterioration throughout the region took the Euro lower overnight. Concern that not only Greece but other European nations will struggle to contain their budget deficits were echoed by EU economic and Monetary Affairs Commissioner Almunia who was quoted by Bloomberg as saying that the fate of one is the fate of all and that the situation in Greece is having effects on other countries. The comments stoked fears and a run lower on EUR/USD, falling from 1.4410 to an eventual low of 1.4250 in U.S trade. Returning after a long weekend North American markets bought the Greenback against the Euro and Yen with the latter exchanging as high as 91.25. Adding support to the Greenback was a massive increase in Net long Term TIC flows during the month of November which measures the flow of capital into North American denominated assets such as stocks, bonds and money market funds. In other news the USD/CAD jumped almost 1% from 1.0250 to 1.0350 after the Bank of Canada kept interest rates on hold at 0.25% overnight and confirmed that rates will remain at current low levels until the end of Q2. Looking ahead Producer Price data out of Germany and the U.S this evening is sure to capture headlines with the market looking for any increase in supply side inflationary pressures.

:: Data Releases:

• AUD: Jan Westpac Consumer Confidence
• NZD: Q4 CPI & Dec Food Prices
• USD: Dec PPI, Dec Housing Starts & Dec Building Permits
• GBP: Dec Jobless Claims, Dec Claimant Count & ILO Unemployment Rate
• EUR: Dec German PPI
• JPY: Dec Machine Tool Orders & Dec Convenience Store Sales

:: Note: The above exchange rates are based on interbank rates. If you are considering a transfer then please login, register or call us for a live dealing rate.

Regards, OzForex Dealers