ClearFX Daily Commentary - 30/05/2011

Australian Dollar: After a tumultuous week the Aussie Dollar staged a comeback on Friday and after falling to lows near 1.0440 mid-week it was testing the 1.0700 resistance barrier by close of markets. Helped along by weakness in the Greenback and a recovery in commodity prices the Aussie finished the week around 1.0690 and has opened this morning 30 points higher at 1.0720. Critical to the strength and direction of the Aussie will be this week’s Building approval’s figures due tomorrow and Wednesday’s quarterly GDP release. Treasurer Wayne Swan has this morning come out and said Australian GDP has suffered a ‘dramatic hit’ from recent natural disasters and is likely to see a cut of more than 1 percentage point from economic growth in the first quarter of 2011. With Wednesday’s release preceding the June 7 rate decision, the RBA has earlier vowed it will ‘look through’ the disasters’ impact on production and prices and focus on medium-term outlook when setting interest rates.

We expect a range today of 1.0660 – 1.0750

New Zealand Dollar: The New Zealand dollar has continued its bullish run and surged above the 81 cent handle on Friday. Going from strength to strength after the announcement of Chinese investment, lack of local data and inherent Greenback weakness helped the Kiwi finish the week at around 0.8160. With the US Dollar opening this week lower the currency pair trade early on Monday at 0.8180/90 ahead of New Zealand’s April Trade Balance figures with markets anticipating a 603 million dollar surplus, a 139M increase from the previous month. With a positive trade balance boding well for economic health and demand for the local unit this data could provide further strength to the Kiwi, however disappointing figures may see a slip back towards support at 0.8140. The AUD/NZD cross- rate still remains to forge any direction and trades within the recent range around 1.3090 at the opening of markets.

We expect a range today of 0.8100 – 0.8210

Great British Pound: A disappointing week for US fundamental data gave Sterling an opportunity to rally to new highs, and despite a uncertain outlook for UK economic health and monetary policy implications, Cable briefly broke through the 1.6500 handle for the first time in over 2 weeks. Given a degree of domestic support by a 0.3% increase in the Nationwide House Price Index, the Pound reached highs just above $1.65 before closing the week slightly lower at 1.6480. Opening this week trading at the same level, some pressure has been added by the Bank of England’s Chief Economist Spencer Dale warning of hard times ahead for the struggling economy. Dale has said the possibilities of growth remain feeble and along with high levels of inflation presents a significant risk to the country’s recovery. This has contributed to a slip against its antipodean counterparts, this morning opening at 1.5380 against the Aussie and 2.0130 against the Kiwi.

We expect a range today of 1.5280 – 1.5410

Majors: The greenback suffered losses against its major counterparts for the second week running, closing on Friday at 1.4280 against the Euro and 80.85 against the Japanese Yen. Struggling of late with leading indicators signalling a slowdown in the growth and recovery of the world’s largest economy, it seems as though any strength in the US dollar may be drawn from the strength of US equities and the completion of Quantitative Easing II. A mixed bag of data further contributed to the pressure on the Greenback, with Consumer Sentiment reporting an increase however there was an 11.6% decrease in Pending Home Sales in the month of April. With some key figures due for release this week investors will be watching closely; however the ongoing Greek debt crisis along with fluctuating commodities still look like they hold the potential to instil some volatility into this weeks trade. We open this week with the US Dollar on the back foot at 1.4310 against the Euro and 80.70 against the Yen.

Data releases

AUD: HIA New Home Sales m/m; HIA New Home Sales m/m

NZD: Trade Balance

JPY: No data due for release

GBP: Bank Holiday

EUR: No data due for release

USD: Bank Holiday