ClearFX Daily Commentary - 18/07/2011

Australian Dollar: News late Friday from one of Australia''s leading banks that tipped the Reserve Bank of Australia to cut rates rather than raise rates sent the Aussie down almost one cent in late Asian trade with the pair falling from 1.0740 to 1.0650 as the news hit the local wires. Offshore the Australian Dollar remained confined to a 60 pip range (1.0618 to 1.0678) as the global recovery story suggests a potential slowdown and the EU bank stress test results were released limiting any advance in riskier assets. On the local data front this week, all eyes will be firmly placed on Tuesdays Reserve Bank of Australias minutes from its 05th July meeting with any clues as to the timing of an interest hike (or cut), adding to an already volatile dollar. Dollar direction this week will come from offshore, more specifically the ongoing Sovereign Debt crisis in Europe and the raising of the debt ceiling by the 2nd August in the US.

We expect a range today of 1.0600 to 1.0680

New Zealand Dollar: Last Thursdays release of stronger than expected quarterly and yearly GDP (Gross Domestic Product) in NZ and the fact that some traders are betting on interests being raised sooner rather than later saw the Kiwi go from strength to strength against the Greenback with the pair holding above the 84 cents level for the majority of Fridays trade. During the session the pair traded between 0.8390 and 0.8470, as it appears that the local economy is recovering quicker than expected after the catastrophic earthquake in Christchurch at the beginning of the year. The Kiwi is up against its 16 most traded peers and opens at 1.2574 against the Australian Dollar.

We expect a range today of 0.8400 to 0.8500

Great British Pound: GBPUSD was limited to a one cent range on Friday (1.6073 to 1.6173) as the ongoing sovereign debt crisis out of Europe and a negative reading in the local equity markets saw traders limit their buying opportunities. The release this week of the Bank of Englands minutes from its previous meeting will be viewed very closely by the market for any signs of interest rates hikes in the UK and if any additional members are in favour of increasing the current Asset Purchase programme beyond GBP200 billion pounds. Against its Southern Hemisphere counterparts the Pound Sterling currently is changing hands at 1.5130 against the Australian Dollar and 1.9051 against the New Zealand Dollar.

We expect a range today of 1.5037 to 1.5237

Majors: The EURO declined against the Greenback as Moodys Investor Service downgraded Irish debt to junk and 8 (2 Greek, 5 Spanish and 1 Austrian bank) of the 90 participating banks that took part in the EBA’s (European Banking Authority) recent stress tests failed, with further 16 banks still in the danger zone. The EURO traded between 1.4090 and 1.4250 despite the findings of the stress tests but some in the market believe that the tests carried out by the EBA were not robust enough and potentially many more banks could fail should Greece default on its debt obligations. Comments from Standard and Poors Friday alongside those of Moodys Investor Service from earlier in the week that they may downgrade US Debt rating saw the Greenback down against the Japanese Yen, with the pair hitting a low of 78.50 before climbing back modestly during the session to just above 79. Other US Dollar news included a weaker reading in the Empire State Manufacturing Index and a modest decline in CPI.

Data releases

AUD: No data slated for release

NZD: CPI q/q

JPY: Bank Holiday

GBP: No data slated for release

EUR: No data slated for release

USD: TIC Long Term Purchases