Daily Forex Forecast - 17 May 2011
Australian Dollar: Traders were content to play the ranges during yesterday’s Asian session once support kicked in around the US105 cent area. The Australian Dollar moved back up towards 1.0560 despite economic data revealing that the number of home loans approved in Australia fell to a 10-year low in March.
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Both the number and value of home loans fell in reflection of a soft housing sector throughout the March quarter. The Aussie also stalled on the topside as local equities lost ground. During the offshore session, the currency moved up to a high of 1.0640 in line with a stronger Euro however, volatility remains and we open this morning at 1.0550. On the cross rates, the AUD is buying 0.7440 on the Euro and 0.6510 against the British Pound.
We expect a range today of 1.0500 – 1.0610
New Zealand Dollar: In a continuation of the recent risk aversion, the New Zealand Dollar has hit fresh 10-day lows overnight at 0.7755 and opens at 0.7790 on Tuesday. Providing some support for the currency during Monday’s domestic session was a bounce in New Zealand’s service sector with the BNZ-Business NZ Performance of Service index rising 1.5 points to 52.6 in April.
This was the highest reading since September last year and gave the currency a boost towards 0.7851. During the offshore session, the kiwi dollar was again volatile moving to a high of 0.7866 before another fall to once again test support at US78 cents. Meanwhile, the kiwi opens lower against the Australian Dollar at 0.7380.
We expect a range today of 0.7750 – 0.7830
Great British Pound: Pound Sterling (1.6193) opens little-changed on Tuesday as traders continue to scale back estimates of when the Bank of England (BoE) will need to raise interest rates. The currency has been hovering near six-week lows for the last two sessions ahead of tonight’s April inflation report and tomorrow’s release of the minutes from the BoE’s May 5 meeting.
Whilst inflation is likely to show an acceleration, recent weak economic data releases have been keeping the currency pinned down. Meanwhile, the pound opens steady against the Australian Dollar (1.5340) and marginally higher against the New Zealand Dollar (2.0750).
We expect a range today of 1.5310 – 1.5400
Majors: The Euro climbed from recent six-week lows overnight after economic data released on Monday showed that inflation in the 17-nation zone accelerated to 2.8 per cent annual pace. The single currency opens at 1.4150 after trading as high as 1.4243 overnight. With consumer prices increasing at their fastest pace since 2008, pressure is building on the European Central Bank (ECB) to raise interest rates from the current level of 1.25 per cent.
In sovereign debt developments, EU finance ministers have approved a EUR78bio package to Portugal whilst extra funds for Greece will be conditional upon further asset sales and deeper cuts to spending. Meanwhile, the big dollar opens largely unchanged against the Japanese Yen at 80.70 even as US stocks extended their two-week decline and government debt encroaches the 14.3 trillion dollar ceiling.
Data Releases
AUD: Reserve Bank of Australia meeting minutes
NZD: No data today
JPY: Machine tool orders, April
GBP: Consumer Price Index, April
EUR: EZ and German ZEW Survey of Economic Sentiment, May
USD: Building Permits & Housing Starts, April
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