ClearFX Daily Commentary - 07/06/2011

Australian Dollar: The Aussie spent most of Monday’s domestic session above the US107 cent mark on speculation there may be a surprise rate hike by the Reserve Bank of Australia when it meets today. Most analysts however are tipping that rates will remain on hold at 4.75 per cent for a seventh straight month. The currency ran into sellers around the 1.0770 area and quickly retreated to 1.0730 after the ANZ job advertisements index dropped 6.5 per cent in May for the biggest monthly drop in more than two years. During the offshore session, the Aussie moved to a low of 1.0690 ahead of this morning’s opening level of 1.0715. Meanwhile, the Aussie opens marginally higher against the Euro at 0.7340.

We expect a range today of 1.0700 – 1.0790

New Zealand Dollar: A national public holiday in New Zealand on Monday kept volumes and ranges to a minimum with the currency largely tracking movements in the Australian Dollar. The kiwi bounced from 0.8065 last Friday and firmed yesterday around the 0.8150 area. A key event for the currency this week is Thursday’s interest rate decision by the Reserve Bank of New Zealand. Whilst the official cash rate is widely tipped to remain on hold at 2.5 per cent, the accompanying statement from RBNZ Governor Mr Allan Bollard will be closely scrutinised by FX markets. The kiwi opens at 0.8130 this morning against the greenback and 0.7580 against the Australian Dollar.

We expect a range today of 0.8110 – 0.8200

Great British Pound: The Pound traded in a 1 cent range (1.6340 – 1.6455) overnight as a report released by the International Monetary Fund indicated that the UK government should stick to its deficit cutting plan and that the current economic weakness is only “temporary”. The IMF also made mention to the current inflation figure, which was at 4.5% in April, would probably return to the Bank of England’s 2% target with a reasonable timeframe. The news provided some positive news for CABLE which has been under some selling pressure of late as local data continues to point to a slowdown in the economy however speculation continues to remain when the Bank of England will begin to raise interest rates , with many in the market putting this towards the end of 2011. Against the Australian and New Zealand Dollar, the Pound is changing hands at 1.5240 and 2.0075 respectively.

We expect a range today of 1.5200 – 1.5280

Majors: The Euro (1.4575) moved lower for the first time in two days after comments from a German finance official that uncertainties remained over the second Greek bailout package. The single currency was also sold heavily late in the New York session after Jean-Claude Juncker, who is chairman of the euro zone finance ministers, said the currency was over-valued. The euro traded overnight between a high of 1.4657 and a low of 1.4556. The move lower is likely to be a corrective pullback in the lead up to this Thursday’s interest rate decision by the European Central Bank. Whilst rates are expected to remain on hold, the market will pounce on any clues as to a July tightening. Meanwhile, the greenback hit fresh one-month lows against the Japanese Yen overnight at 79.96 and opens this morning at 80.04.

Data releases

AUD: RBA interest rate decision

NZD: No data today

JPY: No data today

GBP: No data today

EUR: Euro zone retail sales, April

USD: Consumer credit, April