Daily Dollar Forecast 07/30/2012
Australian Dollar
The Australian Dollar rallied strongly into the close of the week, as increased faith in the recovery plan for Europe made for a risk-on playing field. Although local hours saw only a tentative move higher from the 1.0400 handle, a push higher in US equity markets saw a strong back half leading the Aussie to 1.0480. There was some action on the Euro cross rate as well and after some earlier strength from the shared currency, EUR/USD selling caused a sharp rally in the AUD/EUR where the Aussie now buys 85.15 euro cents. With markets opening at similar levels this morning, new home sales figures are due to be released today as well as event risk from Spanish GDP and an Italian bond auction this evening.
We expect a range today of 1.0390 – 1.0490
New Zealand Dollar
Market sentiment has been lifted over Friday’s trade and the weekend, as European leaders have made it very clear they intend to follow through with suggested recovery plans and do whatever necessary to keep the currency bloc intact. A lack of local data left the New Zealand Dollar to trade from this sentiment and the result was a solid gain against the Greenback to test 81 cents, NZD/EUR reached near 0.6590 and the NZD/AUD touched above 0.7730. Building consents are scheduled for release locally today, with Business Confidence a key event tomorrow.
We expect a range today of 0.8040 – 0.8130
Great British Pound
A little less action has been seen in the Pound compared to other currencies against the Greenback since Friday, however an overall risk-on tone has resulted in a small move higher and a test of 1.5750 several times before markets closed for the weekend. Cable opens at 1.5735 this week with a mixed basket of medium impact released scheduled on the economic docket this evening including CBI realised sales and net lending to individuals. A waning of risk aversion has sent Sterling lower against its antipodean counterparts; support at 1.5000 has just held against the Australian Dollar as did 1.9410 against the Kiwi.
We expect a range today of 1.4970 – 1.5110
Majors
The US Dollar rallied on Friday following the release of the nation’s GDP figures, as many now speculate the number is not weak enough for the Fed to step in with quantitative easing measures in the near future. Meeting expectations of 1.5% growth was by no means stellar, however it was enough to give the Greenback a boost where it jumped off levels near 78.10 against the Yen to find highs of 78.65; a rally through 1.2300 for the Euro was momentarily quashed with the pair falling back to 1.2275. The Euro gained overall however as rumours escalate that euro leaders will follow through with their promises from the June 28-29 summit by seeking a banking licence for the ESM (giving it much more fire power with the financial sector and in the bond market) as well as likely bond purchases announced at this week’s ECB meeting aimed at bringing down soaring bond yields. Words from German Chancellor Angela Merkel and French President Francois Hollande affirming they will do "everything" necessary to protect the single currency have washed well with investors this morning and the euro opens this morning just above 1.2300 ahead of Spanish GDP and an auction of 10 year Italian bonds this evening. The USD/JPY trades at 78.45 before Japanese industrial production figures are released in Asian hours today.
Data releases:
AUD: HIA New Home Sales m/m
NZD: Building Consents m/m
JPY: Prelim Industrial Production m/m
GBP: Net Lending to Individuals m/m, CBI Realized Sales, Mortgage Approvals
EUR: Spanish Flash GDP q/q; Retail PMI
USD: No data due for release