Australian Dollar
A conservative day’s trade was witnessed in Asian hours yesterday as markets weighed up prospects for global growth with the ever-present fear of European contagion. Unable to sustain the equity induced rally above 0.9900 the Aussie Dollar dropped to find support at 0.9890 before a late burst saw the local unit enter offshore trade around 0.9920. Markets soon turned risk off however, and the Australian dollar subsequently lost 1.3% falling below 98 cents to 0.9790 as of this morning’s open. Second tier data today comes in the form of the CB leading index and MI leading index however with an EU summit this evening and a major focus on Greece’s future in the euro, it is unlikely the figures will hold much firepower.

We expect a range today of 0.9750 – 0.9840

New Zealand Dollar
Inflation expectations for New Zealand decreased marginally yesterday to an annualised figure of 2.4% from 2.5%. Effect on the currency unit however was limited as risk sentiment flows continue to dominate direction. In what began as a seemingly more pleasant day for the Kiwi soon evolved into another sell-off as rumours Greece is preparing for a euro exit hit the news wires. Losing nearly 1.7% from earlier highs near 0.7670, the New Zealand Dollar opens this morning at 0.7550 and seemingly still under some pressure. Losing more against the Greenback than its Australian counterpart has resulted in a loss on the cross rate as well, the kiwi sits at 0. 7705 against the Aussie at time of writing.

We expect a range today of 0.7500 – 0.7580

Great British Pound
Annualised inflation has fallen within the Bank of England’s target range for the first time since February 2010 it was reported yesterday, albeit at the very top end. Falling from 3.5% to 3.0% in the month of April, the International Monetary Fund added the to the release by commenting the central bank should resume quantitative easing measures to stimulate the economy. The British Pound reacted negatively to this set of information and, despite an 18.8 billion pound reduction in government borrowing, fell to levels near 1.5760. Continuing speculation that Greece will sooner or later exit the euro dampened any attempted recovery and after daily lows of 1.5750 were established, Cable opens this morning back at 1.5760. Sterling has made ground against the risk sensitive Aussie and Kiwi however and trades this morning at 1.6090 and 2.0880 respectively.

We expect a range today of 1.6040 – 1.6170

Majors
Comments made by former Greek Prime Minister Lucas Papademos to the effect Greece is considering preparations for exiting the euro-zone eliminated any gains made by riskier assets so far this week. Dow Jones reported the comments made in an interview to the news service and the subsequent flow into the Greenback and Japanese Yen was dramatic. The euro dollar fell to find support at 1.2670, posting a daily loss of over 1%; the Dollar index gained 0.75%. Helping the Greenback receive its fair share of haven flows was an increase in existing home sales. A bigger rise than expected signalled to the markets the American people are feeling more secure about employment prospects and thus are more willing to take on mortgages; all in all positive for the US economic recovery. Today’s focus will be on the Japanese Yen and the conclusion of the Bank of Japan’s two day central bank meeting. Trading under pressure in the lead-up to any announcements, just the threat of monetary easing and a weakening of the Yen has eased recent rallies in the currency. The USD/JPY currently trades at 79.96 after earlier trade briefly above 80.00; the EUR/USD has fallen to find support at 1.2680 with the next crucial level down at 1.2620.

Data releases:

AUD: CB Leading Index m/m; MI Leading Index m/m

NZD: No data due for release

JPY: Overnight Call Rate; Monetary Policy Statement; Trade Balance;

GBP: MPC Meeting Minutes; Retail Sales m/m

EUR: Current Account; Industrial New Orders m/m; EU Economic Summit

USD: New Home Sales; Crude Oil Inventories