Australian Dollar:
The focus yesterday was mainly on the mid-year budget released by Wayne Swan, with the savings included outlined in the release leading to a perceived increase in the chance for a rate cut on Melbourne Cup day. Many commentators saw the fiscal policies announced having a tightening effect on the economy while curbing inflation which would allow the RBA room for looser monetary policy. Looking at the currencies the markets response was hidden by Japanese data released at the same time that was US dollar negative pushing the AUD/USD to 1.0330, however it could be seen by looking at the cross rates, particularly the AUD/NZD which dropped 30 points at the time of release and is now trading at 1.2617. Also reinforcing the rate cut story was comments made by RBA board member Jillian Broadbent who spoke about the higher AUD and the negative impact it is having on the economy. With the focus back on the RBA the CPI figures released tomorrow will remain in the spotlight. This morning we open at 1.0320 having reached a low of 1.0297 overnight.

We expect a range today of 1.0290 – 1.0345

New Zealand Dollar:
With local markets closed yesterday all direction came from offshore but even that failed to provide much movement with the NZD trading tight ranges. The Kiwi did gain some support from a weakening AUD following the mid-year budget release that had many picking an increased chance of further rate cuts by the RBA. With many picking the RBNZ to remain on hold for the time being (or one cut at most) the NZD is likely to receive an increased proportion of the so called carry trade as the relative yields of the AUD and NZD continue to converge. Following the release the Kiwi moved over 0.8170 and then spent the rest of the day trading between 0.8160 and 0.8186 and this morning we find ourselves at 0.8176.

We expect a range today of 0.8150 – 0.8195

Great British Pound:
The GBP broke back above 1.6000 during Asian trade yesterday following releases from Japan and Australia that saw it benefit from falls in those currencies. The strength continued into the London open after a report from private firm, Dublin-based Experian Plc, showed insolvencies in UK dropped 3.1% from a year earlier. It continues the mixed data we have seen over the past week and sets us up for increased interest in GDP data later in the week. Also supporting the GBP was the local election results out of Spain which suggested support for austerity policies and increased the markets bets for a Spanish bailout. In terms of currency levels the GBP/USD rallied to an overnight high of 1.6051 before tracking lower to open this morning at 1.6015, while the GBP/AUD is at 1.5510 and GBP/NZD is at 1.9585.

We expect a range today of 1.5485 – 1.5560

Majors:
The big market driver yesterday was the Japanese data released which provided signs of a weakening Japanese economy and an increase in pressure for further easing by the BOJ. Japan’s trade deficit widened in September to 0.98 Trillion JPY from last month’s reading of 0.46 Trillion and was the worst result on record. At the same time there were also comments from Bank of Japan Governor Shirakawa who warned of tough times ahead for the global economy and the need for the central bank to up their easing policies, increasing focus on their next meeting due for end of this month. The USD/JPY continues to rally and is now changing hands at 79.90, its highest level since mid July. Heading into Europe also saw EUR continue its move back above 1.3 after Spanish Prime Minister Mariano Rajoy''s Popular Party won an election victory in his home region of Galicia. This is seen by some as sign of support for the austerity measures implemented by the Popular Party and may pave the way for Spain requesting further support from the ECB in November. The EUR/USD is currently trading at 1.3059 after reaching a high of 1.3081. In focus today will also the third US presidential debate, beginning around midday AEDT.

Data releases:

AUD:Conference Board Leading Index

NZD: No data today

JPY: Small business confidence

GBP: BBA Loans for House Purchases

EUR:Consumer Confidence

USD: Richmond Fed Manufacturing Index