Australian Dollar: By late yesterday morning the Australian dollar had fallen from opening levels of 1.0780 to 1.0680, the lowest level in two weeks. While already under pressure as investors turn away from risky assets, another incentive to sell was provided by local retail sales and trade balance figures.

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Retail Sales fell 0.1% for the months of June and our trade surplus was narrower than expected at 2.05 billion. Heading offshore the Australian dollar managed to reclaim some ground however it was soon to return to previous lows as concerns mount for the recovery of the US economy.

In a volatile environment we open this morning back above $1.07 at 1.0760 and anyone with a vested interest will be eyeing the Euro-Zone this evening as the ECB is due for its monthly meeting. With a lack of domestic data the Aussie’s direction is likely to depend on risk sentiment over the course of the evening.

We expect a range today of 1.0680 – 1.800

New Zealand Dollar: As the world’s focus shifted back and forth between the US and Europe, higher-yielding assets remained under selling pressure yesterday and the New Zealand Dollar fell to a low of 0.8580 by the end of the onshore session.

Some quick profit-taking on what has been the Kiwi’s lowest level in almost two weeks saw the currency push back near 0.8670 however these levels were not able to be maintained as poor US Services PMI resulted in another flock away from riskier currencies.

Opening this morning at 0.8640, New Zealand’s unemployment rate is due for release early on and surveyed economists are expecting the rate to drop from 6.6% to 6.5%. As the Kiwi begins to look like it might be struggling to hold onto recent against the Australian dollar, a positive figure may be just what it needs to keep levels above 80 cents for the moment.

We expect a range today of 0.8590 – 0.8680

Great British Pound: The Great British Pound has pushed stoically above $1.64 against the Greenback after markets were informed the nation’s services sector grew at a much better than expected pace in July. Posting a PMI of 55.4, Cable gained almost 70 pips immediately and continued higher throughout the North American session as well as the Greenback came under pressure.

Opening this morning at 1.6440 tonight brings the Bank of England’s monthly monetary policy meeting and although rates are widely expected to remain at benchmark lows it is the accompanying rhetoric investors will be watching for clues to the position of the central bank. Against the Australian and New Zealand Dollars, Sterling is also higher and after moving above $1.53 briefly against the Aussie it sits at 1.5255; recent losses have also been pared against the Kiwi and it sits at 1.9015.

We expect a range today of 1.5110 – 1.5320

Majors: Worse than expected ISM Non-Manufacturing PMI caused the Greenback to lose ground yesterday as concerns continue the country’s economic growth will be hindered by extensive budget cuts.

The services industry was reported to have grown at the slowest pace in 17mths and this, combined with a decrease in factory orders, sent the US Dollar almost immediately below 77.00 against the Japanese Yen. Despite a brief consolidation around the 76.85 level the Yen did give back some ground as investors still question whether the BOJ will stage any kind on intervention to relieve the effects of the high Japanese currency on struggling exporters.

Late Yesterday afternoon in Asia the Euro staged its own rally pushing 2 cents higher to 1.4340. Disappointing data from the US overnight helped the shared currency hold onto its gains as the direction for the Euro now hinges on the ECB and its monetary policy meeting tonight. We open this morning with the Euro trading at 1.4320 and the Greenback buying 77.05 Japanese Yen.

Data releases

AUD: No data due for release

NZD: Employment Change q/q; Unemployment Rate

JPY: No data due for release

GBP: Official Bank Rate; MPC Rate Statement; Asset Purchase Facility

EUR: Minimum Bid Rate; ECB Press Conference

USD: Unemployment Claims; Natural Gas Storage

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