Last Week Recap

Strong US corporate earnings and positive daily finishes in global equity markets along with a mixed bag of US economic data saw the Greenback lose ground against the Pound and EURO but hold steady against the YEN. Against the EURO the US Dollar traded in a 1.4117 to 1.4291 range as varied data on both sides of the Atlantic failed to drive either currency. Of particular interest to the market last week were Monday's German Producer Price Index and Fridays Euro Zone Purchasing Managers Index and German Business Climate, Current Assessment and Expectations Survey. Mondays result came in worse than forecast at -0.1% compared with the expectations of 0.4% and Fridays release all came in above market expectations and was enough for market participants to push the EURO towards the 1.42 mark and onto the eventual weekly high of 1.4291. Against the YEN movement was limited to a low of 93.07 and a high of 95.27 against the Greenback. Some positives out of the US last week were Wednesday's House Price Index (actual 0.9%; forecast -0.2%) and Thursdays Existing Home Sales for June which increased from 4.84 million to 4.89 million.

The Pound traded a narrow range against the US Dollar last week between 1.6315 and 1.6560. Bank of England Minutes released on Wednesday had little impact on Cable. The MPC voted 9-0 for the central bank base rate to remain on hold whilst also agreeing not to increase quantitative easing from ?125 billion in July. UK GDP data however, released on Friday came in much worse than expected. Figures showed that the UK economy contracted by 0.8% between April and June which saw GBP/USD end the week lower at 1.6420.

The Australian Dollar maintained a one and half cent range (0.8085 to 0.8210) last week as local data came in spot on with expectations. The release Wednesday of the Consumer Price Index came in just as markets pundits had forecast at 0.5% quarter on quarter and 1.5% year on year. The initial reaction on the release was fairly low-key and it was not until offshore trade that the little battler made its move toward the 0.82 cent mark. Positive US company earnings and strong daily finishes in global equity markets kept the dollar will placed to head up during the week. Friday's release of the University of Michigan's forecast for consumer confidence capped any Australian Dollar advances in New York trade, with the figure increasing for July from 64.6 to 66.

The New Zealand Dollar almost moved in unison with its Trans Tasman rival as better than expected corporate earnings from the US and a brief return to riskier assets saw the Kiwi trade between 0.6488 and 0.6632. On the data front, the Performance Service Services Index for June was slightly worse than previous, coming in at 45 compared with a previous of 46.2.

The Canadian dollar continued to strengthen vs. the USD posting a 3.75% gain this week against a 5% gain last week. The most notable event spurring on the C$ occurred when the Bank of Canada's Quarterly Monetary Policy Report was released Thursday. In it, the BOC stated they expect a return to positive GDP growth this quarter and well into 2011 while the U.S. will lag behind. The market broke below 1.0920 support on this and tested a 6 week low of the 1.0780 area in early Friday trading.

The Week Ahead

USD: Looking to the week ahead in the US and once again we see the largest threat to the greenback's stability and direction is in the form of risk appetite. On the data front it starts on Monday with the release of New Home Sales data for the month of June. On Tuesday is the release of US Consumer Confidence survey for the month of July. Consumer Confidence levels are generally linked with consumer spending which should provide traders with a closer insight into the current economic situation in the United States. On Wednesday is the release of Durable Goods Orders figure excluding transportation expenditures for the month of June. This data release will be closely watched as it tends to move markets on release. Finally on Friday is the release of GDP annualised for quarter two. US GDP is the most comprehensive overall measure of economic output and provides key insight as to the driving forces of the economy.

AUD: Last week the Aussie had a few goes to push through 0.8200 on the back of a bullish outlook from the RBA and a global equity rally. This week the Aussie dollar may come under some pressure if we see a start to a correction in risk appetite through global equity markets. On the data front this week it is fairly light starting with Tuesday's Conference Board Leading Index for the month of May. The Conference Board Leading Index is used to forecast short to mid-term growth in the Australian economy. On Thursday is the release of New Home Sales data and Building approvals both for the month of June. AUD/USD support comes in at 0.8084 whilst there is resistance at 0.8269.

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