:: Australian Dollar: The Aussie dollar faltered at attempts to reach 87 cents in local trade yesterday running into some strong intraday selling around 0.8650 following worse than expected economic data. With Retail Sales dropping 1% in July, Home Loans and Investment lending also falling the AUD traded below 86 cents to finally find support at 0.8565 during European trading. Risk sentiment once again improved in U.S trade following the Federal Reserve Banks Beige Book report taking the Australian dollar back above 86 cents to retest 0.8650 which once again held firm. This morning sees the local unit open around 0.8620 with investors eyeing today's employment report and economist forecasts for the official unemployment rate to hold steady at 5.8%. A large increase in unemployment to 6%, although unlikely, would trigger another round of selling and a swift move back below 86 cents whilst a lower than expected rate could see 87 cents tested.

- We expect a range today in the AUD/USD rate of 0.8575 to 0.8675

:: Great Britain Pound: The Pound Sterling drifted lower in early London exchange testing, but holding 1.6450 against the Greenback following the announcement of a slightly wider than expected July U.K Trade Balance. The GBP/USD then staged a rally towards 1.6600 as the volatility continues heading into this evenings BoE interest rate meeting. Although there is next to no chance of any change in interest rates the markets will be looking to the central bank for guidance as to the whether the stimulus package will be expanded and if so by how much. The Pound opens this morning at 1.6550 and 1.9165 against the U.S and Australian dollars respectively.

- We expect a range today in the GBP/AUD rate of 1.9100 to 1.9200

:: New Zealand Dollar: The Kiwi dollar briefly flirted with the 70 cent level overnight following an upbeat U.S Fed Beige book report and a rally in the Euro. In early morning trade the RBNZ kept the official cash rate at 2.5% sending a clear sign that rates will remain at current levels through until the latter part of 2010. The accompanying statement specifically mentioned the negative effect of a higher Kiwi dollar saying that if the exchange rate were to continue its recent appreciation and/or the recovery in house prices were to undermine the improvement in household savings, then the sustainability of the present recovery will be brought into question. The initial reaction saw the NZD drop from 0.6965 to 0.6920 only to bounce straight back to 0.6970 moments later, a remarkable sign of the current resilience in the Kiwi dollar.

- We expect a range today in the NZD/USD rate of 0.6900 to 0.7000

:: Majors: German inflation forecasts for August came in on expectations and unrevised from previous estimates at 0.2% for the month keeping EUR/USD confined to a range between 1.4465 and 1.4515 for the majority of the European trading day. It took a relatively upbeat Beige book, a business survey collected from the U.S Federal Reserve's 12 regional banks, to improve risk appetite once again. Five of the district banks reported signs of improvement with the majority reporting signs of stability in their local economies. This was enough to push the EUR/USD above 1.4515 to an eventual high near 1.4600 whilst USD/JPY dropped to 91.60.

:: Data Releases:

  • AUD: Aug Employment
  • NZD: RBNZ Rate Decision - Rates on Hold & Q2 Terms of Trade
  • USD: Jul Trade Balance & Weekly Jobless Claims
  • GBP: BoE Rate Decision
  • EUR: Aug German Wholesale Price Index
  • JPY: Aug Domestic Corporate Goods Price Index & Jul Machine Orders
  • CAD: BoC Rate Decision