:: Australian Dollar: The Aussie dollar traded lower yesterday dropping from 0.9160 to an Asian session low of 0.9105 following a disappointing NAB Business survey and Chinese Trade data which soured sentiment towards growth in the region. The major news however driving moves on currencies overnight was the U.S Federal Reserve bank meeting and the decision to reinvest funds into long term treasuries as a means to boost spending and spur growth. By doing this the central bank is in effect keeping borrowing rates low for "an extended period of time" as it reaffirmed in its release subsequent to the conclusion of the meeting. In what was a volatile offshore session the AUD/USD fell towards 0.9050 prior to the announcement only to rally sharply back to this morning's open of 0.9135. The local unit is expected to remain volatile with today's release of the Australian Westpac Consumer Sentiment survey and Chinese economic data in the form of CPI, PPI, Retail Sales and Industrial Production - all key indicators of the performance for the Asian and global economy.

- We expect a range today in the AUD/USD rate of 0.9080 to 0.9200

:: Great Britain Pound: With traders squaring short USD positions heading into the FOMC meeting overnight the market ignored a better than expected U.K Trade Balance to take GBP/USD lower from late Asian levels of 1.5800 to a low around 1.5710 in Europe. It was a different story however during North American trade with the Cable reversing rapidly to gain almost 1.3% and exchange at an overnight high of 1.5905 following the U.S Central Bank meeting with it delivering a downbeat assessment on the economy and taking measures to boost growth. This morning sees the GBP open at 1.5845 and 1.7355 against the U.S and Australian dollars respectively.

- We expect a range today in the GBP/AUD rate of 1.7280 to 1.7420

:: New Zealand Dollar: After threatening to trade back above the 73 cent level in early trade yesterday the Kiwi followed the lead of the Aussie dollar lower throughout the Asian session to enter offshore trade near the 72 cent handle. The main catalysts for the move lower were some nervous USD short covering ahead of the Fed meeting and deterioration in the Chinese Trade Balance which suggests a global economic slowdown is occurring. Certainly the U.S central bank thought it ought to act in order to spur growth in North America at its meeting overnight where it announced their intention to reinvest funds into treasuries in order to keep borrowing rates low for an extended period. The news triggered a wave of Greenback weakness which saw the NZD/USD bounce back a cent from its earlier lows at 0.7165 to a high of 0.7265 before drifting slightly lower to open at 0.7235 this morning. With no N.Z data scheduled until tomorrow direction for the NZD is likely to come from the release of several key Chinese economic indicators today.

- We expect a range today in the NZD/USD rate of 0.7200 to 0.7300

:: Majors: The JPY strengthened somewhat in Asia yesterday following the conclusion of the Bank of Japan meeting and comments from the banks Governor Shirakawa who watered down concerns surrounding the effect of a strong Yen on the economy's performance. Although they are "well aware" the recent strength in the currency poses a downside risk for "corporate sentiment" he went on to add that they have to "assess the currency's effect on the economy in a well-balanced manner". USD/JPY fell from an Asian high of 86.05 to exchange as low as 85.62 in early London before a massive short squeeze heading into the much anticipated FOMC meeting. The big dollar peaked at 86.23 prior to the announcement with the U.S Federal Reserve bank releasing a rather sombre statement whilst also announcing measures to boost growth for the first time since March 2009 sending the Greenback lower. Following the news the USD retreated to a low of 85.15 against the Yen whilst in exchange with the Euro it fell sharply from 1.3095 to 1.3230. Looking ahead the U.S dollar is likely to continue to trade heavily with treasury yields remaining under pressure as a consequence of the announcement to reinvest principal payments on mortgage backed securities into long term bonds.

:: Data Releases:

  • AUD: Aug Westpac Consumer Confidence
  • NZD: No Data Expected Today
  • USD: Jun Trade Balance & Jul Monthly Budget Statement
  • GBP: BoE Inflation Report, Jul Claimant Count, Jun 3mth ILO Unemployment Rate & Jul Jobless Clains Change
  • EUR: No Data Expected Today
  • JPY: Jul Machine Orders & Jul Domestic Corporate Goods Price Index
  • CNY: Jul CPI, Jul PPI, Jul Retail Sales & Jul Industrial Production

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