ClearFX Daily Commentary - 10/05/2011

Australian Dollar: It was a quiet session to start the week yesterday however ongoing speculation of upcoming interest rate rises and a 1% increase in job advertisements last month meant the Aussie Dollar steadily gained ground throughout the Asian session. From opening levels near 1.0700 the Aussie pushed higher and by the start of offshore trade it had gained around 70 points. The prevalence once more of the Euro zone and its Sovereign debt issues momentarily caused the rally to falter and this saw support levels being tested back near 1.0700. Support held and a late rally by commodities in the afternoon of North American trade sent the Australian dollar higher again paring recent losses and on to break through $1.08. Opening slightly off this high, we start the Asian session at 1.0790 with all eyes on our Trade Balance being released this morning and tonight’s annual budget release.

We expect a range today of 1.0710 – 1.0850

New Zealand Dollar: After opening the week right on the 79 cent handle, the New Zealand Dollar managed to consolidate comfortable above this level through the Asian session into European trade. The downgrade of Greece’s debt rating once more by S&P and the focus on the regions debt crisis put the brakes on this rally and the Kiwi hence dropped back below 0.7900 to find support just below at 0.9895. A late rally in US stocks and commodities help the Kiwi reclaim its losses and by the end of New York the pair was trading up above 0.7950 although a recent, sharp drop means we trade this morning at 0.7915. Against the Australian Dollar trade remained range-bound for most of the day, trading between 0.7360/75 although a quick drop out of this range this morning sees the Kiwi buying 73.35 Aussie cents.

We expect a range today of 0.7880 – 0.7970

Great British Pound: The Pound has weakened against the Greenback and other counterparts overnight as the United Kingdom’s growth forecasts were lowered by an industry group and Standard and Poor’s cut Greece’s sovereign debt rating. In its quarterly forecasts, the Confederation of British Industry said gross domestic product (GDP) will rise 1.7% in 2011 in contrast to a previous estimate of 1.8%. This in combination with risk aversion resulting from the Greece downgrade sent Cable lower, losing over a cent to hit lows of 1.6280. Sterling managed to recover these losses late in the North American session as the Greenback suffered under a US equity and commodities recovery; opening this morning at 1.6390 against the big dollar but lower against the Aussie (1.5190) and steady against the Kiwi (2.0690).

We expect a range today of 1.5090 – 1.5240

Majors: Recent rumours of Greece’s potential exit from the European Union have been strongly denied by key figures; however another downgrade of the country’s credit risk rating by S&P overnight has helped keep Greece and the European sovereign debt crisis in the forefront of investors’ minds. This sparked a fall in the Euro and a retreat to safe-haven assets pushing the shared currency to a session low near 1.4250, contributing to its 4.3% decline in value in less than a week. A more than favourable German trade balance did little to provide support and EUR/USD opens this morning slightly off recent lows at 1.4350. The Japanese Yen has gained ground since this weeks open despite the BOJ Monetary Policy Meeting Minutes clearly showing policy makers are in favour of further weakening of the Yen. The devastating March 11 earthquake has hit Japan’s economy hard and the nation looks to it huge exporting industry as the key to recovery, however as the board expressed its satisfaction at low Yen value this appeared to provide the Yen with some support and combined with risk aversion and Greenback weakness sees the Yen open this morning at 80.25.

Data releases

AUD: Trade Balance; Annual Budget Release

NZD: No data due for release

JPY: No data due for release

GBP: BRC Retail Sales Monitor y/y; RICS House Price Balance

EUR: French Industrial Production m/m; Italian Industrial Production m/m

USD: Import Prices m/m; Wholesale Inventories m/m