Daily forex forecast - 25/10/2010
Australian Dollar: The Aussie opens higher on Monday at 0.9850 and received a boost after comments by U.S. Treasury Secretary Timothy Geithner at the weekend's G-20 conference. In a choppy offshore trading session, the unit hit a low of 0.9760 but quickly regained those losses after Mr Geithner said that officials should "commit to undertake policies consistent with reducing external imbalances below a specified share of GDP over the next few years". In short - he is looking for stronger Asian currencies, the comments providing support for the Aussie late in the session. All-important local CPI data is due for release on Wednesday where a figure above 0.8 per cent for the quarter could see the Aussie launch another assault upon parity.
We expect a range today of 0.9835 - 0.9920
New Zealand Dollar: The kiwi did not fare as well as its Australian counterpart after the weekends G-20 summit of finance ministers. The kiwi has retreated from an overnight high of 0.7508 to open the new week at 0.7488 after finance chiefs pledged to avoid weakening their currencies to boost exports and let markets set foreign-exchange values. Local markets are closed for Labour Day on Monday and the kiwi is expected to drift in line with the prevailing greenback sentiment. Interest rates in New Zealand are expected to remain on hold at 3 per cent later in the week when the RBNZ announces its rate decision on Thursday.
We expect a range today of 0.7460 - 0.7525
Great British Pound: Pound Sterling opens lower today against its US counterpart at 1.5670. The currency posted its biggest weekly decline against the greenback since August last week on further concerns of quantitative easing by the Bank of England. In overnight trade the pound moved between a high of 1.5750 and a low of 1.5650. Third quarter GDP data is due for release on Tuesday where a result around 0.4 per cent is likely to strengthen the case for leaving rates on hold at 0.5 per cent. Meanwhile, the pound opens weaker against both the Australian Dollar (1.5900) and the New Zealand Dollar (2.0900).
We expect a range today of 1.5900 - 1.6000
Majors: The Euro begins the new week at 1.3960, little changed from last Fridays opening level of 1.3920 as strong technical resistance comes into play around the 1.4000 area. The greenback has weakened sharply in recent weeks on the back of speculation the US Federal Reserve will extend its quantitative easing program. Comments out of the weekends G-20 talks were dollar-supportive as US Treasury Secretary Timothy Geithner urged his counterparts to set targets for current account imbalances. The G-20 agreed to "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies" according to a post-meeting statement. Meanwhile, the greenback opens at 81.25 against the Japanese Yen.
Data releases
AUD: Producer Prices, Q3
NZD: Markets closed, Labour Day
JPY: Merchandise Trade Balance, Sept
GBP: BBA Loans for House Purchase, Sept
EUR: Euro Zone Industrial New Orders, Aug
USD: Existing Home Sales, Sept
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