:: Australian Dollar: With the market extra sensitive to any negative news at present yesterdays shock 7% drop in the Westpac Consumer Confidence report for May sent the Aussie plummeting in local trade. Investors ignored a strong wage cost report instead focusing on the negative and with the AUD already looking vulnerable to more downside the AUD/USD pair fell quickly from above 86 cents nearing 85 cents in Asia, eventually settling into a range between 0.8535 and 0.8590 during the afternoon. With the German short selling ban having been announced after the equity markets had closed yesterday European traders immediately punished riskier assets upon their open sending the Aussie dollar spiralling below 84 cents to its lowest level since August 2009. A sharp correction during the U.S time-zone sees the AUD open near 85 cents with the wild fluctuations likely to continue in Asia today.
- We expect a range today in the AUD/USD rate of 0.8400 to 0.8580
:: Great Britain Pound: Strong support emerged for the Cable at 1.4250 with the currency experiencing what technical analysts call a double bottom. The minutes from the Bank of England meeting two weeks ago indicated the central bank were gaining some confidence that the U.K economy is beginning to show some positive signs unanimously vowing to maintain is bond purchase program at 200 billion Pounds. Having weathered the initial storm of selling the GBP/USD rallied to open this morning on its overnight highs around 1.4450 taking the GBP/AUD cross rate with it to 1.7000.
- We expect a range today in the GBP/AUD rate of 1.6850 to 1.7100
:: New Zealand Dollar: The Kiwi collapsed under a barrage of selling overnight falling from 0.6890 to a low near 0.6650 as Europe returned in a very negative frame of mind. With investors in panic mode the flight back into the Greenback intensified and it took U.S economic data to spark a reversal. The release of Consumer Prices and the FOMC minutes saw the NZD/USD rally back to open this morning hovering around the 68 cent mark. One would imagine that N.Z economic data released today may take a back seat to developments in the broader Asian region however with the market extra sensitive to negative news at present disappointing results could see the Kiwi punished yet again.
- We expect a range today in the NZD/USD rate of 0.6720 to 0.6900
:: Majors: The announcement of a short selling ban in Germany heightened panic on financial markets yesterday sending EUR/USD below 1.2150 in Asia, its lowest level since April 2006 whilst USD/JPY dropped below the 91 handle. In key U.S economic data released overnight inflation during the month of April surprised the market falling 0.1% amidst expectations of another 0.1% gain from the previous month. The CPI result coupled with the previous days PPI took away what had appeared to be increasing expectations of a rate rise by the FED in 2010, weakening the Greenback somewhat. In the other key release the minutes to the FOMC meeting showed the central bank is in no hurry to sell 1.1 trillion dollars of mortgage backed securities preferring to wait until after it starts to raise interest rates. The central bank also lowered forecasts for inflation whilst keeping GDP and employment predictions unchanged for the next two years. Investors have been waiting for some direction as to the possible timing of any sign of tightening in the U.S however they were disappointed somewhat by the statement as “most members projected that economic slack would continue to be quite elevated for some time”. This morning sees the big dollar pare back the majority of its overnight gains exchanging at 1.2420 and 91.80 against the Euro and Yen respectively in what is expected to be another wild ride in Asia today.
:: Data Releases: AUD: May Consumer Inflation Expectations NZD: Budget Statement, May ANZ Consumer Confidence & Apr Credit Card Spending USD: May Philadelphia Fed Index, Apr Leading Indicators & Weekly Jobless Claims GBP: Apr Retail Sales EUR: Apr German Producer Prices JPY: BoJ Minutes