Daily Forex Commentary 1/9/2010

:: Australian Dollar: Australian economic data released yesterday surprised the market somewhat with Retail Sales, Building Approvals and the Current Account all coming in above expectations. Consumer spending rose 0.7% during July, up from 0.4% the previous month however it was the massive narrowing in the Trade Deficit from 16.5 billion AUD to 5.6 billion, the narrowest since 2002, which attracted the most attention. The news provided some support for the Aussie dollar which initially rallied from early morning lows of 0.8905 following the news to an intraday high of 0.8955. Despite the strong domestic economy offshore events dictated direction during the afternoon and overnight sessions with global investors concerned about the prospects for Japan and the U.S weighing on the AUD/USD exchange rate. This morning sees the local unit open at 0.8900 with support expected to come from what is likely to be a strong Australian GDP result today.

- We expect a range today in the AUD/USD rate of 0.8885 to 0.8985

:: Great Britain Pound: Short term technical support on the GBP/USD at 1.5450 gave way during the Asian afternoon yesterday with the market ignoring a slight increase in Mortgage Approvals focusing instead on a less than expected increase in private sector lending and economic developments in North America. The Cable traded to a low of 1.5330 overnight following an increase in demand for the Greenback and Yen after the release of the U.S Federal Reserve Banks minutes to the August 10 policy meeting. The GBP/AUD cross rate also opens lower at 1.7200 this morning edging towards support at 1.7180 with this level likely to be tested following the release of Australian economic growth data today.

- We expect a range today in the GBP/AUD rate of 1.7120 to 1.7280

:: New Zealand Dollar: Despite some positive sentiment from across the Tasman yesterday and a stronger than expected 3.1% rise in N.Z Building Permits for July the Kiwi tracked lower from yesterdays open around 0.7035 to exchange as low as 0.6965 against the Greenback overnight. All eyes were on the release of the U.S Federal Reserve Bank minutes to the August 10 meeting with the market somewhat optimistic leading into the announcement. The release however gave very little in the way of new information and highlighted the delicate nature of the predicament the central bank finds itself in. Although it was weighed down by negative risk sentiment overnight the NZD/USD opens up from its lows at 0.6990 whilst the AUD/NZD cross is at its highest level since April 30 at 1.2755.

- We expect a range today in the NZD/USD rate of 0.6950 to 0.7020

:: Majors: Following the Bank of Japan's announcement to expand its bank lending program by 10 trillion Yen on Monday Japanese Prime Minister Naoto Kan announced yesterday a further 920 billion yen would be spent by the government as it attempts to spur domestic demand and weaken the strengthening currency. The co-ordinated strategy was aimed at reversing the Yen's strength however the market was less than impressed by the announcements and USD/JPY fell from 84.65 to enter the European session near the 84 handle at 84.05. In offshore trade investors were keenly anticipating the release of the U.S Federal Reserve Banks minutes from the last meeting with the expectation that more detail on how the Fed plans to inspire growth to be revealed. The market was somewhat disappointed by the release as it lacked any new information and reinforced sentiment chairman Bernanke delivered over the weekend. Risk aversion returned with policy makers uncertain if the downward revisions in economic growth would restrain consumer spending "for some time" triggering another round of USD/JPY selling from an offshore high of 84.58 to 83.82. In other news German unemployment came in slightly better than expected sparking a rally in the EUR/USD from 1.2630 to an eventual high near 1.2750 prior to the Fed's announcements and opens this morning at 1.2680.

:: Data Releases: