Wednesday, 8 September 2010 - Market Commentary
:: Australian Dollar: It was a volatile intraday session for the Aussie in Asia yesterday as investors eyed resolution to the political stalemate in addition to the Australian and Japanese central bank meetings. After opening near its highs at 0.9170 the AUD/USD traded between 0.9135 and 0.9170 until the conclusion of the BoJ meeting with a dovish assessment from the central bank increasing risk aversion dragging the local unit down slightly from 0.9170 to 0.9140 . The RBA statement carried little in the way of new information but on the whole was upbeat about the local economy however this was offset by investor’s negative reaction to a Labor victory with the government almost immediately pledging its allegiance to the controversial mining tax. Offshore investors continued to take risk off the table with demand for the Greenback and Yen intensifying as North American equity markets fell and the Aussie dollar opens this morning near its overnight lows around the 91 cent level.
- We expect a range today in the AUD/USD rate of 0.9060 to 0.9150
:: Great Britain Pound: The Pound Sterling traded in a narrow range during yesterday’s local session forming intraday support at 1.5350 against the Greenback. This level gave way in European trade however following a disappointing German manufacturing report which cast doubts over growth prospects for Europe’s largest economy. The negative sentiment boosted demand for the U.S dollar which saw GBP/USD briefly dip below the 1.5300 handle. A 2.8% increase in consumer spending as measured by the BRC Retail Sales Monitor added some support however and the GBP recovered somewhat to open this morning at 1.5355 USD. The GBP/AUD cross rate also found some much needed support around 1.6750 overnight thanks mainly to a slightly lower Aussie dollar opening this morning at 1.6870.
- We expect a range today in the GBP/AUD rate of 1.6800 to 1.6920
:: New Zealand Dollar: With no N.Z economic data for direction the Kiwi washed around the 72 cent handle against the Greenback in Asia yesterday with any attempts at a rally capped by negative risk sentiment. A dovish outlook by the Bank of Japan coupled with some concerns around Germany overnight sees the NZD/USD open marginally lower at 0.7180 this morning ahead of today’s N.Z Q2 Manufacturing Activity report. The AUD/NZD cross rate bounced back from a dip to 1.2610 to open at 1.2665 with resistance above 1.2700 likely to cap any advances in Asia today.
- We expect a range today in the NZD/USD rate of 0.7150 to 0.7225
:: Majors: As expected the Bank of Japan kept rates on hold at 0.1% yesterday and in a dovish view for the outlook said “Against the backdrop of increased uncertainty about the future, especially for the U.S. economy, and associated instability in the foreign exchange and stock markets, attention should be paid to downside risks to Japan’s economy”. The news saw an increase in risk aversion and the Yen actually strengthen more as USD/JPY fell from 84.10 to an eventual offshore low around 83.50. The Euro also declined overnight, falling below 1.2800 against the Greenback in early offshore exchange following a woeful report on German manufacturing report. Factory orders for Europe’s largest economy were expected to have slowed from 3.6% in June to around 0.5% in July however the -2.2% result was well below economist forecasts. It is a worrying sign given Germany’s somewhat resilient economy that has been a shining light for the rest of Europe and as such EUR/USD was sold off to open this morning on its lows at 1.2680. U.S investors returned from the long weekend in a bearish mood following the news out of Asia with the “relief rally” that followed Friday’s employment report running out of steam with equity markets in the region shedding around 1% on the day.
:: Data Releases:
- AUD: Jul Home Loans
- NZD: Q2 Manufacturing Activity
- USD: Sep Beige Book & Jul Consumer Credit
- GBP: Jul Industrial Production & Jul Manufacturing Production & Sep NIESR GDP estimate
- EUR: Jul German Trade Balance
- JPY: Jul Trade Balance, Jul Machine Orders & BoJ Monthly Report
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