ClearFX Daily Commentary - 19/07/2011

Australian Dollar: The Aussie moved lower during Monday’s domestic session spooked by recent comments from some quarters that the next move in interest rates may in fact be a cut. Whilst the jury is still out and much will depend on next week’s release of the consumer price index, it was enough to send the currency beneath US106 cents. There was some buying interest at 105.90 and support also emerged in the form of gold hitting fresh record highs just shy of US$1,600/oz – a twenty dollar rise on levels late last week. Investors are continuing their retreat into the precious metal as a hedge against further declines in the greenback. Gold peaked overnight at US$1,607.35 an ounce. Meanwhile, in offshore trade, the unit moved to a low of 1.0560 where once again, buyers emerged taking the Aussie back to this morning’s opening level of 1.0600.

We expect a range today of 1.0540 – 1.0630

New Zealand Dollar: The kiwi rose half-a-US-cent immediately after the release of inflation data on Monday hitting a high of 0.8488, not far beneath the post-float high of US85 cents reached late last week. Hot on the heels of last week’s growth data, the consumer price index rose 1 per cent in the June quarter pushing the annual rate to a 21-year high of 5.3 per cent and fuelling speculation the Reserve Bank of New Zealand will need to raise rates later this year. However, the currency did not spend very long at these lofty levels and fell sharply to US84 cents during the domestic session as traders took profits. The unit settled down and headed into the offshore session trading at 0.8425. The kiwi opens at 0.8445 on Tuesday against the greenback and higher against the Aussie at 0.7960.

We expect a range today of 0.8400 – 0.8500

Great British Pound: Pound Sterling (1.6050) opens weaker against its US counterpart today after UK house prices declined in July providing further evidence that interest rates are likely to remain low for an extended period. Rightmove PLC reported that UK home sellers lowered asking prices by 1.6 per cent compared to a gain of 0.56 per cent in June. Whilst higher against the Euro (0.8787), sterling hit an overnight low of 1.6005 against the Greenback. Meanwhile, the pound opens weaker against both the Australian Dollar (1.5130) and the New Zealand Dollar (1.9000).

We expect a range today of 1.5110 – 1.5180

Majors: A flight to safety was the overriding theme during the European and US sessions on Monday amid continuing concerns that European leaders will be unable to agree on any concrete solutions to contain the debt crisis. The Swiss Franc (0.8177) hit an all-time high on the greenback, the Yen rallied against several major currencies and gold surged to a peak of US$1,607.35 an ounce. Euro-area officials meet in Brussels on Thursday to discuss “financial stability” as bond yields reach record levels in Spain and Italy. The Euro (1.4110) opens weaker against the greenback today and hit an overnight low of 1.4013 as European Central Bank President Jean-Claude Trichet repeated his opposition to any restructuring of Greek debt. .

Data releases

AUD: RBA July minutes

NZD: No data today

JPY: No data today

GBP: No data today

EUR: German & Euro zone ZEW surveys, July

USD: Housing starts and building permits, June