Daily Forex Commentary 21/7/2010

:: Australian Dollar: The Aussie sprung to life either side of the Reserve Bank release of the July board meeting minutes moving to an intraday high of 0.8745 before slipping back towards US87 cents. The central bank noted that "headline inflation was expected to rise" and, referring to consumer price data due out next Wednesday, "the important question for the board at the next meeting would be whether the new information materially changed the medium term outlook for inflation". Traders interpreted the minutes as being less "hawkish" than expected which resulted in the Aussie losing some of its early momentum above US87 cents. The losses were short-lived however and the currency rallied to an overnight high of 0.8845 ahead of this morning's opening level of 0.8830.

- We expect a range today in the AUD/USD rate of 0.8760 to 0.8865

:: Great Britain Pound: Pound Sterling opens lower against the greenback on Wednesday at 1.5260. During overnight trade, the pound retreated from a high of 1.5308 taking its lead from another soft session on UK equity markets which lost ground for the fifth straight trading day. Sterling hit an overnight low of 1.5152 as commodity-linked currencies rallied across the board on improved risk sentiment. As a result, the pound opens sharply lower against its antipodean rivals - 1.7270 against the Australian Dollar and 2.1285 versus the kiwi.

- We expect a range today in the GBP/AUD rate of 1.7220 to 1.7315

:: New Zealand Dollar: The New Zealand Dollar tracked higher against the Greenback during the Asian session as market participants climbed back aboard the "riskier asset train" with the Kiwi hitting a high of 0.7088. The NZ Dollar has gained back almost a full cent from the sell-off that occurred last Friday during US trade that saw the unit touch a low of 0.7030 on the back of massive market risk aversion. During the offshore session the New Zealand Dollar moved between US71 cents and a high of 0.7167. With no significant data out of New Zealand until next week (Monday - Trade Balance & Thursday - Reserve Bank of New Zealand's interest rate decision and official statement) the dollar will take direction from offshore events.

- We expect a range today in the NZD/USD rate of 0.7120 to 0.7200

:: Majors: 24 hours out from US Federal Reserve Chairman Ben Bernanke's semi-annual testimony to congress, the greenback moved higher against the Euro (1.2883) as markets speculate the tone of his speech may not be as bearish on the economy as first thought. U.S. equities eventually rallied after an early retreat which also saw the Euro fall from fresh two-month highs above 1.3000. The big dollar also rallied against the Japanese Yen to open on Wednesday in Sydney at 87.45. Meanwhile, the Bank of Canada, as was widely anticipated, raised interest rates by 25 basis points to 0.75 per cent. The move took the Canadian Dollar off 2-week lows to see the USD/CAD open at 1.0520.

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