Australian Dollar: Fears of an RBA rate cut at next week’s central bank meeting sent the Australian Dollar lower yesterday, the catalyst being worse than expected quarterly CPI data. Inflation on consumer goods reportedly slowed to 0.6% in the September quarter however when adjusted for the most volatile of items, prices were shown to have only risen 0.3%. The Aussie, which is supported by its high yielding status, dropped 0.5% immediately on the report to 1.0365. It eventually reached its daily low of 1.0320 overnight as European Leaders failed to produce a ‘comprehensive’ plan to manage the region’s debt crisis, delaying the details until at least next month. Further details did emerge however in relation to protecting the banks against a Greek default and the Aussie has recovered this morning to 1.0400.

We expect a range today of 1.0320 – 1.0450

New Zealand Dollar: After trailing to lows of 0.7920 on European uncertainty, the monthly meeting of the Reserve Bank of New Zealand has just given the nation’s currency the lift it needed. While most central banks are talking of rate-cuts to combat a global slowdown the Kiwi’s central bank governor stated that, so long as the effect on their country was mild, domestic strength will likely require future interest rate hikes. The New Zealand Dollar has moved 0.8% higher on the RBNK’s hawkish tone to break resistance at 0.8000 and consolidate just above at time of writing. Interest rate expectations has also helped the Kiwi recover some recent ground lost against the Australian Dollar and it has fallen below 1.3000 to 1.2980 (0.7700).

We expect a range today of 0.7920 – 0.8040

Great British Pound: Sterling has broken five days of gains on disappointment following the much anticipated second EU summit yesterday. EU leaders failed to deliver the promised comprehensive debt plan and the British Pound fell from levels above 1.6000 when it was clear we would have to wait longer for details. Cable saw lows near 1.5890 although the strategic release of a few key points relating to the recapitalisation of banks helped ease investor concerns and the Pound recovered to trade at 1.5970 this morning. Continuing uncertainty means Sterling is also higher this morning against the Australian Dollar (1.5360) however a hawkish RBNZ meeting sent the GBP/NZD below 2 cents to 1.9930.

We expect a range today of 1.5300 – 1.5420

Majors: The markets will now have to wait until next month for answers as EU leaders once again kick the proverbial can down the road. Despite a promise by key figures from France and Germany, details of a critical plan to get Europe’s debt back on track are now due to be finalised at the earliest during the next G20 meeting on the 3rd/4th of November. The Euro dropped from 1.3960 to 1.3800 on the initial disappointment however it managed to reclaim some ground to 1.3900 as clarity was provided surrounding the planned recapitalisation of Europe’s banks. The Japanese Yen flirted once again with record levels on the uncertainty however threat of an intervention by the Bank of Japan in the near future kept the Yen off these highs, just as the central bank is scheduled to begin its two-day monetary policy meeting. The safe-haven pair currently trade at 76.25.

Data releases

AUD: No data due for release

NZD: Official Cash Rate; Trade Balance

JPY: Monetary Policy Meeting

GBP: CBI Realized Sales

EUR: German Prelim CPI m/m; M3 Money Supply y/y

USD: Advance GDP q/q; Unemployment Claims; Pending Home Sales m/m