Australian Dollar: Yesterday's Australian New Home Sales data added support to the Aussie dollar during local trade with the 11.4% rise catching most analysts by surprise. The local unit appeared destined to test the psychological 88 cent barrier in early European trade however resistance between 0.8760 and 0.8780 capped any further advances for the fifth time in a week. In a stark reminder of the vulnerability of the Aussie dollar to a return to broad risk aversion North American equity markets fell around 1% following worse than expected U.S housing data taking AUD/USD back to 0.8620 in quick time.

- We expect a range today in the AUD/USD rate of 0.8590 to 0.8660

Great Britain Pound: The Pound Sterling was marked considerably lower overnight following bearish comments from the Bank of England Governor Mervyn King. In a newspaper interview the head of the central bank was quoted as saying the weak Sterling was helpful and it would assist in stabilising the U.K economy. The GBP/USD immediately fell from its perch at 1.6350 briefly finding some support ahead of 1.6150 before resuming its downtrend following an increase in demand for the U.S dollar. The Pound opens this morning near its overnight lows of 1.6025 against the Greenback and at 1.8550 Australian dollars.

- We expect a range today in the GBP/AUD rate of 1.8500 to 1.8620

New Zealand Dollar: After what has been a stellar run higher on the Kiwi dollar this week it appeared the trend was going to continue heading into offshore trade overnight. The NZD/USD held firm around 72 cents in Asia before rallying in Europe back towards 73 cents. The move however ran out of momentum near 0.7270 with a sharp correction occurring during U.S trade. Investors ignored an improvement in U.S weekly jobless claims focusing instead on poor housing data and comments from the Bank of England, flocking back to the Greenback across all major currencies. The Kiwi opens this morning on its lows at 0.7150 ahead of N.Z Trade Balance data with most economists forecasting further widening in the deficit from 163 million NZD the previous month to between 330 and 350 million for August.

- We expect a range today in the NZD/USD rate of 0.7100 to 0.7180

Majors: After ignoring lower than forecast German IFO data overnight the EUR/USD grinded higher to peak at 1.4800 heading into U.S trade. Despite a reduction in weekly jobless claims out of the states investors were cautious on the outlook for the economy following an unexpected fall in existing home sales during the month of August. Coming only 24 hours after the U.S Federal Reserve bank pointed towards some improvement in the housing sector the -2.7% fall caught the market by surprise triggering risk aversion and a drop in equities. The Greenback subsequently rallied against the majors and opens this morning at 1.4650 and 91.25 against the Euro and Yen respectively whilst the biggest move came against the Great British Pound (see commentary above). In other news today sees the release of the Bank of Japan minutes to the recent meeting with the market looking for further insight on the central banks stimulus measures.

Data Releases:

  • AUD: No Data Expected
  • NZD: Aug Trade Balance
  • USD: Aug Durable Goods, Uni of Michigan Confidence Survey & Aug New Home Sales
  • GBP: Q2 Total Business Investment
  • EUR: Aug German Import Price Index & French Q2 GDP Forecasts
  • JPY: BoJ Minutes
  • CAD: No Data Expected

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