Daily Forex Commentary 19/10/2010

:: Australian Dollar: The Australian Dollar slid to 0.9800 against the US Dollar as investors continued to buy back the Greenback in a wave of profit taking. An increase of 0.9% in new motor vehicle sales in September did little to slow the Aussie's pace of decline on the day. Comments from the ECB's President weakened the Euro and in turn heightened aversion to high-yielding currencies early in the offshore session. The Aussie recovered offshore, rallying to just under 0.9950 US Dollars, as stocks and commodities rose. This morning the Australian Dollar opens near its overnight high at 0.9930 versus the US Dollar ahead of the minutes of the Reserve Bank of Australia October meeting.

- We expect a range today in the AUD/USD rate of 0.9845 to 0.9990

:: Great Britain Pound: Following speculation the Bank of England may resume its bond purchasing program, expanding it by as much as 100 billion, the British Pound fell to a three day low of 1.5835 US Dollars. As the British public prepare for the government's deepest spending cuts since the second World War, Sterling remains vulnerable. "The Bank of England unfortunately looks like the only 'plan B' the government has, but quantitative easing just doesn't act fast enough" former policy maker David Blanchflower said in an interview on Bloomberg Television. Sterling regained some of its composure following an unexpected drop in US production in September. This morning the Pound opens lower at 1.5885 US Dollars, 1.6030 against the Aussie and 2.0975 versus the Kiwi.

- We expect a range today in the GBP/AUD rate of 1.5975 to 1.6100

:: New Zealand Dollar: Consumer prices in New Zealand rose 1.1% in the third quarter. The acceleration in inflation exceeded the 1% expected by the market, led by higher government tobacco and energy charges. The report broke the Kiwi's two day losing streak, rising against 14 of 16 major counterparts offshore when investor appetite returned for high yielding assets after pricing in the US Fed's stimulus expectations. The Kiwi rose to 0.7596 US Dollars overnight following figures from the US Federal Reserve indicating the first decline in factory, mines and utility production in more than a year, falling 0.2% in September. This morning the Kiwi opens at 0.7550 versus the US Dollar.

- We expect a range today in the NZD/USD rate of 0.7535 to 0.7600

:: Majors: ECB President Jean-Claude Trichet's denial of any plans to end the bond purchasing program and his usual warnings about excessive volatility sent Euro tumbling throughout Asia until it found support at 1.3830 US Dollars early offshore. Earlier last week Bundesbank President Axel Weber had called for an end to the European Central Bank's bond purchasing programme. European stocks advanced to the highest level since April reviving demand for risky assets, spurring the Euro to target 1.4000 US Dollars. Meanwhile the Greenback's gains against the Japanese Yen in Asia were erased as the Yen advanced on bets Japan will refrain from intervening to weaken its currency before this week's meeting of policy makers from Group of 20 nations following a smaller than expected decline in its Tertiary Industry index.

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