Daily Dollar Forecast 05/21/2012
Australian Dollar
The Australian Dollar remained unimpressive on Friday as risk adverse markets made things difficult for the local unit. An absence of local data meant focus remained on international developments and as a consequence new lows for 2012 were established. Looking to break below 0.9800 at one point, profit-taking helped a move back towards 0.9880 however underperforming US equity markets provided strong headwinds and final positions for the week saw the Aussie at 0.9840. Opening close to here this morning, risk sentiment looks to remain the key driver of the AUD/USD this week as the local economic calendar holds no scheduled key releases.
We expect a range today of 0.9760 – 0.9860
New Zealand Dollar
The ground continued to give way beneath the New Zealand dollar on Friday as risk sentiment remained an overwhelming driver of the markets. There was little, if any, news to focus on from a domestic standpoint and thus the downward slide continued; initially finding footing at 0.7550 before sliding below 0.7530. A squaring of positions after this move sees the Kiwi trade back near 0.7560 this morning with quarterly inflation expectation due for release tomorrow. Moving lower also against the Australian Dollar, the Aussie broke an important psychological resistance level at 1.3000 on Friday, moving to highs of 1.3040 (0.7669). Unable to hold the level the first time, the pair has moved back above 1.3000 this morning and currently trades at 1.3010 (0.7686).
We expect a range today of 0.7490 – 0.7580
Great British Pound
Sterling slid lower again on Friday as nervous investors continued to flock towards the perceived safety of the Greenback. Ongoing political uncertainty in Greece casts a shadow over the whole region, pulling the Pound lower by association to support around 1.5730. Recovering to medium term support at 1.5800 this morning, MPC member Adam Posen is scheduled to speak later today following the announcement on Friday he will step down from the Bank of England in August. One of the biggest advocates of further monetary easing, his absence may result in a shift in the tone of the central bank away from easing, thus supporting the Pound. A snapshot of the cross rates sees the risk sensitive antipodeans under pressure; the GBP /AUD trades at 1.6070 and GBP/NZD at 2.0900.
We expect a range today of 1.6020 – 1.6150
Majors
Markets have remained in risk off mode on Friday, with the Euro closing lower against the Greenback for the third consecutive week. Worries continue that ongoing political uncertainty in Greece will spill over and infect the Spanish economy, the Euro dipping to four month lows around 1.2650 before a squeeze higher saw the shared currency unit close at 1.2770. A bounce in Spanish banking stocks after earlier heavy falls, as well as a pull-back on the yield of the country’s 10-year bonds, lent support to the final positions of the week, although pressure remained on other assets more directly related to overall risk sentiment. The Greenback strengthened as US equity markets closed in the red and the Japanese Yen finished higher against most major counterparts as demand continued to flow towards safe havens. With no real market moving comments issued by the G8 over the weekend, markets open at similar levels, the EUR/USD at 1.2770 and USD/JPY near 79.15; a rather dull economic calendar should keep market movements in line with risk sentiment for the short term.
Data releases:
AUD: No data due for release
NZD: Visitor Arrivals m/m; Credit Card Spending y/y
JPY: All Industries Activity m/m
GBP: No data due for release
EUR: No data due for release
USD: No data due for release