Australian Dollar
The Australian dollar founded itself under pressure yesterday, with a combination of drivers pushing the commodity currency down towards key technical support at 1.0220. An ongoing fall in iron ore prices remains a factor however; the first contraction of Chinese manufacturing in nine months caused an initial selloff in the marketplace, only to be followed by a disappointing read for local retail sales and ANZ job advertisements. Dropping initially to 1.0260, the local data set pushed the Australian dollar lower still against the Greenback to eventually find support at 1.0230; however Greenback weakness, which has come with rumours of further Fed stimulus, has limited any further losses in the Aussie for now. Highlight of today’s calendar is the RBA meeting for the month of September and although markets are not pricing in a rate cut, attention will be focused on the accompanying statement in order to try and determine the future course for local interest rates. Support for the local unit still lies within the 1.0200/20 range and 1.0300 will likely serve as near-term resistance.

We expect a range today of 1.0200 – 1.0300

New Zealand Dollar
A perceived increase in the probability that further economic stimulus will be undertaken by the US Federal Reserve has lent support to the Greenback of late, however the New Zealand dollar has struggled to benefit on the exchange rate. Over-riding greenback weakness has been a string of disappointing manufacturing releases from China and the euro-zone, pulling the New Zealand dollar lower as commodity markets continue to feel the pressure. Losses were limited to around 30 points against the Greenback, falling to open today at 0.7975, although the Kiwi fell to a 2mth low against the Euro of 1.5800 (0.6329). Weakness in the Australian dollar sent the pair back towards 1.2800 although consolidation finds the antipodean pair at 1.2840 (0.7788) at time of writing.

We expect a range today of 0.7940 – 0.8030

Great British Pound
Cable rallied strongly during Monday’s trade, as Greenback weakness supported a move higher towards 1.5900. A higher than expected reading for the United Kingdom’s services sector saw PMI come in at 49.5, a considerable improvement on last month’s 45.2 and the encouraging data helped fuel the rally. Falling just short of the 1.5900 handle, Sterling still trades at 1.5885 this morning however any gains made against the euro were given back as markets continue to anticipate ECB action on Thursday. This morning Sterling trades generally higher on the crosses with GBP/AUD continuing its push higher to break 1.5500 and GBP/NZD to break 1.9900; today’s highlight for the Pound will be construction PMI due for release this evening.

We expect a range today of 1.5440 – 1.5570

Majors
The first day of trade this week brought with it concerns for further global slowdown, as well as speculation post-Bernanke’s testimony ran rampant as to the likelihood and potential form of any further economic stimulus. Currently the consensus is that further quantitative easing is likely to take place, thus the Greenback has found itself directly under pressure an in a risk sensitive environment, the Japanese Yen has found a degree of support. Chinese manufacturing figures have added fuel to ongoing global growth concerns and euro-zone figures overnight also showed contraction its manufacturing sector. The Greenback remains under pressure at 78.25 against the Japanese Yen, after a sharp test of 78.15, and the euro dollar has pushed slightly higher towards 1.2600 settling to 1.2590 this morning. A manufacturing focus continues this evening with ISM data out of the United States; the next key even for the euro-zone is the highly anticipated ECB meeting on Thursday.

Data releases:

AUD: RBA Cash Rate; RBA Rate Statement; Current Account

NZD: ANZ Commodity Prices m/m

JPY: Average Cash Earnings y/y

GBP: Construction PMI; BRC Retail Sales Monitor y/y

EUR: Spanish Unemployment Change

USD: ISM Manufacturing PMI; Construction Spending m/m