Australian Dollar
The Reserve Bank of Australia cut interest rates by 0.25% yesterday, as markets widely predicted they would. With the result already priced into the markets the Australian Dollar subsequently squeezed higher as those predicting a more bearish RBA closed out their positions. Despite a very initial dip lower the Aussie traded higher within a few minutes and climbed from levels near 0.9750 to test 0.9800 by the open of European markets. The Aussie proved unsuccessful at these levels, and comments from Spanish officials in regards to their financial troubles created enough nerves in the markets to send investors flocking back to the relative safety of the Greenback. Trading around 0.9740 this morning local GDP figures will be the highlight on the calendar where surveyed economists are predicting a 0.5% increase in economic growth in the first quarter of this year, compared to a 0.4% gain the previous quarter.

We expect a range today of 0.9690 – 0.9790

New Zealand Dollar
In a week where all the action seems to be offshore the New Zealand Dollar is once again subject to international influences. During the Asian session it traded to highs above 0.7590 as the Kiwi was lifted also with the Aussie after the RBA was less aggressive with its monetary easing than markets had priced in. The storm clouds soon rolled in over Europe and lows of 0.7520 were seen of the NZD/USD before consolidation higher leaves us trading at 0.7560 at time of writing. The Kiwi has slipped against its Aussie counterpart on the cross rate however, touching lows near 0.7740 before paring some losses to its current level of 0.7765.

We expect a range today of 0.7510 – 0.7600

Great British Pound
The second bank holiday for the Queen’s Jubilee in the UK has kept market movements focused on the international stage and Sterling has subsequently traded in a similar pattern to the neighbouring Euro. Cable touched highs close to the $1.54 handle during Asian hours however concerns over the state of the European economy and Spain’s banking sector sent Sterling south to below 1.5330. In choppy trade around the markets, Sterling has since pared most of these losses and this morning trades back at 1.5370 ahead of construction PMI this evening. Movement against the antipodeans sees Sterling lower at 1.5770 against the Aussie, despite a cut in interest rates by the RBA; levels have returned to those this time 24hrs ago against the and the GBP/NZD changes hands at 2.0315.

We expect a range today of 1.5700 – 1.5840

Majors
The short squeeze higher began forming cracks during Asian trade on Tuesday as the Euro began to drift lower from its short-lived consolidation levels near 1.2530. Spain’s treasury minister declared to the markets that they believe at current yields the door to the credit market has closed and, supporting fears of a banking crisis in Spain, the shared currency tumbled near 0.8%. Also driving the move lower was Markit’s services PMI from Europe, showing German output fell for the first time in six months and the downturns in both France and Spain has accelerated; Markit’s chief economist Chris Williamson commented in the release “the economy is contracting at the fastest pace for around three years.” Retail sales failed to provide any support nor did German factory orders, and consequently the Euro tested lows of 1.2410 during its local hours. A telephone conference between G7 leaders did not move the markets significantly as an official was not released after the fact, although it did curtail further declines in risk sentiment and this morning EUR/USD opens slightly higher near 1.2450. The USD/JPY jumped higher overnight as Japan’s finance minister told the G7 the recent fall in stock market prices and the strong yen are damaging Japan''s economy. With holders of Yen again concerned about a BOJ intervention the exchange rate moved up to sit just below 78.80. On watch today is the ECB monetary policy meeting, where many are calling for easing measures to stimulate the struggling economy.

Data releases:

AUD: GDP q/q

NZD: No data due for release

JPY: No data due for release

GBP: Construction PMI

EUR: Minimum Bid Rate; ECB Press Conference; German Industrial Production; Revised GDP q/q

USD: Revised Nonfarm Productivity q/q; Crude Oil Inventories; Beige Book