ClearFX Daily Commentary - 02/06/2011

Australian Dollar: Investor concerns regarding Australia’s GDP figures proved unwarranted yesterday as only a slight slip below expectations resulted in a 50 point rally immediately upon release. While markets had begun to speculate the figure would be much worse than the originally expected 1.0% decrease, the actual figure of -1.2% relieved investor concerns. With the effects of recent natural disasters creating only a temporary pullback in economic growth the Australian dollar was in high demand during afternoon trade and entered London hours up around 1.0750. Offshore trade saw the Aussie maintain these levels however on the release of US manufacturing and employment data saw a quick shift to safer assets and the commodity currency tumbled 150 points to find support at 1.0600. Opening here today markets will be watching keenly for the release of local Retail Sales and Trade Balance later this morning.

We expect a range today of 1.0550 – 1.0690

New Zealand Dollar: After reaching all time highs of 0.8260 earlier this week, the New Zealand Dollar managed to maintain this strength, trading up around 0.8240 for the majority of yesterday’s session. However it was unable to escape the quick sell-off of riskier assets after disappointing manufacturing growth from two of the world’s largest economies became known to the market. US and China both posted the slowest growth in at least nine months for their manufacturing sectors and the Kiwi subsequently fell over a cent to 0.8130. With both the Kiwi and the Aussie trading as commodity currencies, the sell off had little effect on this cross rate, opening today at 1.3030.

We expect a range today of 0.8090 – 0.8200

Great British Pound: The Pound’s troubles were two-fold yesterday, as it fell over 150 points on both domestic and international data. After sitting very close to 1.6500 against the Greenback, Sterling took its first dive when local Manufacturing PMI slipped from 54.4 to 52.1 and mortgage approvals dropped to the lowest level in four months. Investors proceeded to cut bets on a raise on interest rates by the Bank of England, and Cable dropped 0.56% immediately to a low of 1.6395. As the initial reaction settled, the Pound climbed back above 1.6400 to 1.6430 however a poor set of data from the US lead to risk aversion which sees the pair open this morning lower at 1.6325. Although ground was lost against the Australian and New Zealand Dollars as a result of poor domestic figures, the aforementioned risk aversion helped Sterling pare its losses, opening today at 1.5380 against the Aussie and 2.0050 against the Kiwi.

We expect a range today of 1.5280 – 1.5450

Majors: The Japanese Yen benefited from a flock to safe haven assets yesterday after manufacturing in both the US and China grew at the slowest pace in at least nine months. Despite its safe haven status the Greenback remained heavy as the slowdown in manufacturing growth combined with disappointing employment data spawned concern a slowdown in the world’s largest economy would spread into the second quarter this year. The Yen broke higher of its recent trading range, hitting 80.70 before settling to start today at 80.90. Greenback weakness however, was not enough to protect the besieged Euro, and on the announcement Moody’s was once again downgrading Greece’s debt rating it dropped from almost 4 weekly highs of 1.4450 to test support at 1.4300. With support holding we open today at 1.4320.

Data releases

AUD: Retail Sales m/m; Trade Balance

NZD: No data due for release

JPY: Capital Spending q/y; Monetary Base y/y

GBP: Construction PMI

EUR: No data due for release

USD: Unemployment Claims; Factory Orders m/m; Crude Oil Inventories