Daily Forex Commentary 22/7/2010

:: Australian Dollar: The Australian Dollar opens lower against the greenback at 0.8780. The Aussie was supported around US88 cents during local trade yesterday by further talk of a rise in the official cash rate. The unit hit an intraday peak of 0.8840 after the Westpac Bank-Melbourne Institute leading index of economic activity rose 0.4 points in May, adding to the case for a rate rise, perhaps as soon as the next central bank policy meeting on August 3. During the offshore session the currency traded between a high of 0.8830 down to a low of 0.8760 after U.S. Federal Reserve chairman Ben Bernanke disappointed the market in his testimony to congress commenting that the economic outlook remains "unusually uncertain".

- We expect a range today in the AUD/USD rate of 0.8740 to 0.8810

:: Great Britain Pound: Pound Sterling opens weaker against the greenback today at 1.5160 after the minutes of the Bank of England July meeting revealed consideration of further stimulus measures to underpin the U.K. economic recovery. Interest rates are already at a record low of 0.5 per cent. In overnight trade, sterling moved from a high of 1.5325 down to 1.5123 despite local equities snapping a five-day losing streak. Last week, the currency hit a 3-month high of 1.5472. Meanwhile, the pound opens steady against both the Australian Dollar (1.7250) and the New Zealand Dollar (2.1280).

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

:: New Zealand Dollar: The New Zealand Dollar opens lower today against the greenback at 0.7120. Visitor arrivals and a consumer credit expectations survey did little to inspire the kiwi yesterday, running out of puff around 0.7180. In the absence of any major economic data releases, the kiwi was supported during local trade after a positive session on the region's equity markets. During overnight trade the unit moved down to a low of 0.7116 after U.S. Federal Reserve chairman Ben Bernanke disappointed the market in his testimony to congress commenting that the economic outlook remains "unusually uncertain". Meanwhile, the kiwi opens lower against the Australian Dollar at 0.8100.

- We expect a range today in the NZD/USD rate of 0.7080 to 0.7160

:: Majors: After holding steady between 1.2880 and 1.2910 in Asia yesterday EUR/USD came to life overnight following U.S Fed Chairman Ben Bernanke's testimony to the Senate Banking Panel. Leading into the commencement of the two day event investors had been expecting a relatively upbeat assessment on the state of the economy but were disappointed with the outcome on day one as he delivered a dovish presentation. Of particular interest to the market were comments surrounding the employment outlook where growth in private payrolls of around 100k a month would be "insufficient to reduce the unemployment rate materially" and that it would take a "significant amount of time" for the job market to return to levels seen in 2008. He watered down expectations of a fast paced recovery in economic growth and discussed at length how they would approach the exit of stimulus without much mention of any specific measures to boost growth. U.S equity markets took a dive finishing over 1% in the red and this weighed on risk sentiment sending EUR/USD lower to open this morning near its lows at 1.2750 whilst USD/JPY is also exchanging lower at 86.90. This evening sees the second day of Bernanke's testimony and the release of the stress tests of 91 European banks which will take centre stage in the absence of any other more meaningful economic data.

:: Data Releases: