Australian Dollar
The Australian Dollar has traded under the pressure of today’s RBA meeting so far this week, despite a brief sigh of relief from the global stage. Some exiting of long US dollar positions has seen the Australian dollar being lent some support after what has been a rapid decline in the Aussie and other risk sensitive assets over the past week. However, predictions that the Reserve Bank of Australia are likely to cut interest rates by 25-50 basis points later today has kept a lid on the local unit’s gains. Pushing higher from yesterday’s lows near 0.9640, the currencies change hands at 0.9720 this morning after trading above 0.9730 overnight. Direction today will hinge on whether the RBA deems the international economic deterioration enough to cut domestic interest rates at this stage, or if they hold fire for another month. Critical levels to watch for are 0.9650 on the downside and 0.9770 on the high side.

We expect a range today of 0.9680 – 0.9770

New Zealand Dollar
The New Zealand dollar has held up relatively well since the start of this week as many say the recent declines in risk instruments has been too quick. After twice now dipping below 75 cents against the Greenback over the past fortnight, profit-taking and consolidation of positions has lifted the Kiwi higher with a brave yet unsuccessful attempt at 76 cents yesterday. Opening this morning at 0.7560 an absence of local data will leave the Kiwi vulnerable to the Australian Dollar’s direction today after the RBA meet to set the official cash rate. Speaking of the Aussie, trade on the cross has remained choppy and after rallying to near 0.7800 the NZD/AUD sits this morning at 0.7780.

We expect a range today of 0.7510 – 0.7610

Great British Pound
The first of two public holidays for the Queen’s Jubilee in the UK has dimmed market movements to a degree thus far and Sterling has traded in a narrow range accordingly. Gradually drifting higher as long USD positions have been unwound so far this week, Cable turned its early ceiling of 1.5360 into intraday support and briefly poked its head above 1.5400 in during European hours. Settling to trade this morning at 1.5380 the conservative range is likely to continue today pending any dramatic changes in risk sentiment. Movement against the antipodeans sees Sterling lower at 1.5820 against the Aussie, after an early week push above 1.5930; a similar patter against the Kiwi sees levels of 2.0345 following earlier levels above 2.0440.

We expect a range today of 1.5740 – 1.5880

Majors
A shade of relief has been witnessed by the markets over the first 24 hours of trade this week as rumours of European leaders are beginning to show more willingness to consider unified banking regulation. Although Germany is still adamantly opposed to instruments such as eurobonds, Chancellor Angela Merkel has agreed to discuss proposals on banking coordination with the European Commission’s Jose Barroso when they meet later today. The euro rallied to near 1.2500, its highest level since May 30, although the move can be attributed to an exiting of short positions rather than a decisive reversal in trend. Still representing the underlying troubles of the eurozone, Sentix investor confidence fell to -28.9 in May and PPI was flat in the same month. The Greenback also snapped a three day drop against the Japanese Yen, despite a decreasing in factory orders generating worries the US manufacturing sector may be contracting. Buyers of the Yen are still exercising caution when it comes to their positions as comments by Japanese Finance Minister Jun Azumi on June 1, in regards to taking action should ‘excessive moves’ in the Yen continue, resonate in their minds. Opening levels this Tuesday see the USD/JPY at 78.35 and the EUR/USD just below overnight highs at 1.2495. Data on the calendar to watch for today is services PMI, German factory orders and retail sales from Europe, as well as non-manufacturing PMI from the US.

Data releases:

AUD: Cash Rate; RBA Rate Statement; Current Account

NZD: No data due for release

JPY: No data due for release

GBP: Bank Holiday

EUR: Final Services PMI; Retail Sales m/m; German Factory Orders m/m

USD: ISM Non-Manufacturing PMI