Australian Dollar: Second quarter CPI was revised downwards yesterday after the Australian Bureau of Statistics released an update in their methods for adjusting for seasonal influences.

The figure was thus knocked from 0.9% to 0.7% and speculation of interest rate cuts quickly emerged. The Australian Dollar plummeted to monthly lows against the greenback, falling from intraday highs of 1.0360 to 1.0210. The 1.0200 barrier was soon after briefly taken out as this news coupled with the Moody’s downgrade of two major French banks.

[Kick off your day with our newsletter]

Finding support near the 1.0180 mark during the European session, assurances by European leaders helped our dollar back above 102 cents although poor US Retail sales did help to cause some volatility in the process. The Australian dollar does open off these lows, although weaker than this time yesterday, at 1.0260 against the Greenback and with inflation currently in focus, markets will be looking towards inflation expectations due for release later this morning.

We expect a range today of 1.0190 – 1.0300

New Zealand Dollar: The New Zealand Dollar continued to lose ground during its onshore session yesterday as concerns for the indebted Eurozone continued to remain in the forefront of investors’ minds. It eventually hit intraday lows of 0.8150 after Moody’s announced the downgrade of two major French banks.

A telephone conference held between leaders of France, Germany and Greece helped reassure markets in the short-term and riskier assets recovered some lost ground; although some disappointing US data meant this did not happen without some volatility.

Early this morning the Reserve Bank of New Zealand announced interest rates were to remain on hold for another month, although a rise may be needed if the impact of global events remains mild. The Kiwi has pulled back slightly after the accompanying statement acknowledged a high NZD does weigh on the economy along with the growth forecast for 2012 to be downgraded. Levels at the time of writing are 0.8185 against the Greenback and 0.7975 against the Aussie.

We expect a range today of 0.8110 – 0.8200

Great British Pound: In the words of the UK’s Employment Minister, the nation saw ‘a very unwelcome set of figures’ overnight as quarterly unemployment data was released to the market. Government employment was hard hit, falling at a record rate and representing a direct impact of the UK’s austerity measures. The rate of unemployment did remain unchanged at 7.9% and the average earnings Index increased by 0.1% thus the Pound did not take too much of a hit.

After reaching lows near 1.5710 earlier in the session it did manage to rally back to 1.5810 with the gains mainly being attributed to an improvement in risk sentiment after a conference call between European Leaders. Ahead of Retail Sales figures tonight, Sterling opens this morning at 1.5760 against the Greenback, 1.5360 against the Aussie and 1.9270 against the Kiwi.

We expect a range today of 1.5250 – 1.5420

Majors: The Euro has strengthened after reaching seven month lows earlier this week as leaders from Germany, France and Greece work together to prevent a Greek default and keep the country’s member status in the Euro-Zone. Earlier in the session it dipped below 1.3600 to 1.3591 after it was announced credit rating agency Moody’s downgraded two French banks after reviewing their exposure to Greek debt.

Credit Agricole and Societe Generale both had their ratings downgraded one level whilst BNP Paribas was kept on review for a potential downgrade. Words of reassurance from European leaders helped placate investors however as did assurances by Greek Prime Minister George Papandreou that Greece is determined to meet all the deficit reductions plans it agreed to in exchange for its two bailouts.

The Euro gained 1.3% from intraday lows and traded to a high of 1.3780 before settling to 1.3750, where it opens this morning. Focus shifted away from Europe momentarily overnight and back to the US after Retail Sales posted zero growth for the month of August. This followed a smaller than expected gain the month before and has raised concerns that recently imposed budget cuts are going to hinder the world’s largest economy for some time to come. The Japanese Yen rallied to 2-week highs against the Greenback on this news, reaching 76.60 before pulling back slightly to this morning’s open at 76.65.

Data releases

AUD: MI Inflation Expectations; New Motor Vehicle Sales m/m

NZD: Official Cash Rate; RBNZ Rate Statement; Business NZ Manufacturing Index

JPY: No data due for release

GBP: Retail Sales m/m; Consumer Inflation Expectations

EUR: ECB Monthly Bulletin; CPI y/y; Employment Change q/q

USD: Core CPI m/m; Unemployment Claims; Current Account; Philly Fed Manufacturing Index