ClearFX Daily Commentary - 01/09/2011

Australian Dollar: The Aussie moved lower on Wednesday down to 1.0650 after private sector credit data revealed a fourth straight monthly decline. Home borrowing increased by just 0.4 per cent, however the annual pace is down to 5.9 per cent – the slowest pace since records began in 1976. The weakness in borrowing is one of the reasons the Reserve Bank is likely to leave interest rates on hold next Tuesday at 4.75 per cent. However, the currency rallied steadily throughout much of the afternoon session nudging US107 cents as it headed into overnight trade. Resistance for the Aussie is at 1.0720 which will only be tested today if retails sales data surprises to the upside.

We expect a range today of 1.0640 – 1.0725

New Zealand Dollar: After the recent turmoil on global equity markets, business and consumer confidence in Europe and the United States has been taking a hit. New Zealand is not immune from this and yesterday’s National Bank survey revealed as much with just 34.4 per cent of businesses expecting better times ahead compared to 48 per cent in July. The currency dipped to US85 cents after the data however buyers emerged at this level pushing the unit to an intraday high of 0.8532. During the offshore session, the kiwi moved to a high of 0.8570 ahead of this morning’s opening level of 0.8530 as the greenback recovered some lost ground against several major currencies.

We expect a range today of 0.8500 – 0.8550

Great Britain Pound: The soft economic outlook in the United Kingdom continues to dampen Pound Sterling which opens lower today at 1.6230. A gauge of consumer sentiment as reported on Wednesday by GfK NOP Ltd showed yet another monthly decline in August. The data was not surprising given the recent turmoil on global equity markets not to mention the UK’s worst riots in three decades as the government cuts spending to reduce the budget deficit. In overnight trade, the pound fell from a high of 1.6333 down to 1.6230. Meanwhile, the pound opens weaker against both the Australian Dollar (1.5170) and the New Zealand Dollar (1.9020).

We expect a range today of 1.5140 – 1.5200

Majors: The greenback recaptured some recent lost ground against several of its major rivals as better-than-expected economic data released overnight reduces the likelihood of the Federal Reserve taking further action to stimulate growth. The Euro opens lower today at 1.4370 down from the recent high of 1.4532. US Commerce Department data showed factory orders increased 2.4 per cent in July – the most in four months. Also supporting greenback sentiment earlier in the session was data from ADP Employer Services which showed US companies added 91,000 workers in August. The Government’s non-farm payrolls report is scheduled for release on Friday and is always closely scrutinised by currency markets. Meanwhile, the dollar opens little-changed against the Japanese Yen at 76.60.

Data releases

AUD: Retail Sales, July

NZD: Terms of Trade Index, Q2

JPY: No data today

GBP: Purchasing Manager Index Manufacturing, August

EUR: Germany GDP, Q2; German PMI, August

USD: ISM Manufacturing, August