Daily Forex Commentary 21/10/2010

:: Australian Dollar: The Australian Dollar rose for the first time in 2 days after its drop to the lowest level in 2 weeks. The Aussie dipped to 0.9662 against the US Dollar after Westpac's Leading Economic Index fell by 0.1% in August for the first time since May 2009. Bullish sentiment overcame the previous day's weakness and the Aussie recovered all of its lost ground as it targeted the 0.9900 handle against the Greenback. Despite China's unexpected interest rate hike Rio Tino, the third largest mining company, announced its plan for a $3.1 billion expansion of its Australian iron ore operations while Melbourne based BHP confirmed they will press ahead to boost its own iron ore production. The Aussie snapped back to a fresh intra-day high of 0.9888 against the US Dollar before opening this morning at 0.9866 against the Greenback.

- We expect a range today in the AUD/USD rate of 0.9800 to 0.9900

:: Great Britain Pound: The Pound remained capped at 1.5750 against the US Dollar for most of European session after slipping to 1.5650 versus the Dollar early in Asia. Minutes released from the Bank of England showed a 3 way split 7-1-1 among its policy makers with 'some of the members felt the likelihood that further monetary stimulus would become necessary in order to meet the inflation target in the medium term'. Meanwhile Chancellor of the Exchequer George Osborne outline plans to eliminate a 156 billion deficit including eliminating almost 500,000 public-sector jobs and imposing a levy on banks. The Sterling rallied to 1.5877 against the Greenback as rebounding mining stocks wetted investor appetite. The Sterling opens this morning buying 1.5846 US Dollars and 1.6050 against the Aussie.

- We expect a range today in the GBP/AUD rate of 1.5950 to 1.6150

:: New Zealand Dollar: The Kiwi traded near its lowest level against the Yen in a month and weakest in almost 2 weeks against the US Dollar after dairy prices fell to the lowest in more than two months and RBNZ Governor Alan Bollard declined suggestions New Zealand's Reserve Bank should intervene in the foreign exchange market to aid the nation's exporters. Bollard said the banks options were quite limited and 'the times we feel we can be effective are when we are around the peak or trough of the cycle and also when the exchange rate setting may be fundamentally driven by domestic policy distortions.' Moving offshore the Kiwi reached 0.7566 against the Greenback following a Federal Reserve regional survey showed the economy expanded in September at a "modest pace." This morning the Kiwi starts the day at 0.7543 against the US Dollar.

- We expect a range today in the NZD/USD rate of 0.7500 to 0.7600

:: Majors: The Euro benefitted as stocks rebounded led higher by PSA Peugeot Citroen, Boeing and Yahoo! After their earnings beat estimates. German producer prices rose 0.3%, beating market expectations of a 0.2% expansion. The Euro regained more than 1% on the US Dollar rallying from 1.3697 to 1.3990 against the Greenback. Meanwhile the US Dollar reached a 15 year low against the Japanese Yen dipping to 80.83 overnight as reports from the US Fed showed Manufacturing activity, demand for nonfinancial serves, consumer spending, new motor vehicle sales and the tourism sector all saw stable to mild increases in activity in September and early October with little sign of accelerating.

:: Data Releases: