ClearFX Daily Commentary - 11/07/2011

Australian Dollar: The Aussie Dollar closed out a busy and volatile week without breaking trend on Friday. After oscillating wildly between 1.0650 and 1.0780 on various data sets and continual swings in risk sentiment, the New York session brought with it disappointing US unemployment data, sending the Aussie tumbling from 1.0780 to a near break of 1.0700. With support levels holding, the Australian dollar managed to rally back in its usual resilient fashion to close the week at 1.0760. However China ensured traders were kept on their toes even over the weekend as they had scheduled both CPI and PPI to be released on Saturday. Key to the Aussie was Chinese CPI which reported a higher than expected rise to 6.4% and an impact was seen first thing this morning as AUD/USD opened lower, just off support at 1.0700. Forefront in investors’ minds is the risk Chinese monetary policy officials will see the need for further rates rises in the coming months. In risk off markets, the Aussie is also lower against the GBP, JPY and NZD.

We expect a range today of 1.0650 – 1.0770

New Zealand Dollar: The New Zealand Dollar forged fresh record highs as it remained supported by both local events and Greenback weakness into the close of markets. As speculation grows ahead of this week’s GDP figures the local unit remains supported above 83 cents and upon the release of US Non-Farm Payrolls we saw the Kiwi rally to new highs near 0.8375 by close of markets on Friday. Opening lower this morning at 0.8350, Chinese inflation figures released on Saturday have dampened demand for both the Kiwi and the Aussie as investors are concerned the Chinese may raise interest rates again. With New Zealand sending a lot of its exports to China, and policy that is aimed at restricting the economy will certainly add downward pressure to its currency. As the Aussie too feels the effect of these numbers, the antipodean cross opens at 1.2830 (0.7795).

We expect a range today of 0.8290 – 0.8365

Great British Pound: The Great British Pound found the catalyst it needed to break through the $1.60 handle on Friday, in the form of poorer than expected US employment figures. After spending most of Friday capped below resistance and wallowing in its own economic concerns, Sterling rallied sharply pushing from 1.5940 to nearly touch 1.6080. Unable to maintain the full value of the spike, Cable settled to trade into the close of markets around 1.6040. Opening marginally lower today at 1.6020/30, many expect the Pound to remain on the defensive ahead of this weeks inflation and employment data, due out on Tues and Wednesday respectively. At a time where positive indicators for the Pound are few and far between, investors will be watching these figures for a glimmer of hope that the BOE may eventually be forced to raise interest rates.

We expect a range today of 1.4880 – 1.5010carlyp

Majors: The Greenback lost considerable ground before close of markets Friday, as Non-Farm Employment changed a measly 18,000 opposed to a forecasted 97,000 and the unemployment rate of the world’s apparent super-power increased to the highest level this year. The release had many predicting a much better than expected number based on Wednesday’s associated ADP Employment figures and failure to deliver resulted in the largest fall in the US Dollar for the past month. Against the Japanese Yen the Dollar dropped around 1% to 80.56 and the Euro rallied 80 points to encounter resistance at 1.4340. As a result, safe-haven gains were seen across the board with the Japanese Yen and the Swiss Franc both finishing out the week on a high note. Additional fuel for these gains came once again from the Euro-Zone as concerns remain for several of its member’s debt obligations and as a result we saw the Euro particularly give back ground against the US. On open this week, markets seem dampened by risk aversion, EUR/USD trading at 1.4210 and USD/JPY down near 80.50.

Data releases

AUD: Home Loans m/m

NZD: No data due for release

JPY: M2 Money Stock y/y; Household Confidence; Prelim Machine Tool Orders y/y

GBP: No data due for release

EUR: French Industrial Production m/m

USD: No data due for release