All eyes on RBA rate announcement

Australian Dollar:

The Australian dollar began the week trading just shy of the US93 cent handle. As Monday morning commenced the Aussie started to drift downwards whilst investors awaited a string of figures being released locally and manufacturing data out of China. Inflation numbers were better than expected however building approvals slid downwards by 3.5 per cent where the forecast was for a rise of 1.3 per cent. As the data was released the AUD dropped by 15 points to touch lows of 0.9267 however quickly retraced back to the levels before the numbers. Investor’s eyes turned swiftly to China, Australia’s biggest trading partner’s Manufacturing Index which came in shy of estimates of 48.4 at 48.1. The poor figures sent the Aussie sharply downwards and the AUD gave up a quarter of a cent against the USD. As the day continued the Aussie continued to slide touching lows of 0.9253. Overnight the AUD held strong amidst robust US data managing to open today only 10 points off yesterday’s open at 0.9273. All eyes will now turn to the Reserve bank of Australia’s cash rate announcement this afternoon where it is widely expected the RBA will leave rates on hold at record lows.

• We expect a range today of 0.9225 – 0.9310

New Zealand Dollar:

The New Zealand dollar began the day strong keeping in line with one of the better performances against other major currencies last week. As the morning began the Kiwi settled into a tight range on the basis that no local data was being released on Monday. The Chinese announced their HSBC Final Manufacturing PMI mid-way through the Asian session which disappointed and the NZ dollar started to trend in a downward direction. The Index came in at 48.1 which was below the forecast of 48.4 and the previous month figures of 48.3. Any number on the index below the 50.0 shows that the industry is contracting. Overnight the Kiwi showed its resilience once more managing to shrug off strong US numbers to open today stronger at 0.8678 against the Greenback. With another day of no local data eyes will focus across the Tasman on the Australian RBA rate’s decision and the US trade balance overnight.

• We expect a range today of 0.8625 – 0.8710

Great British Pound:

As expected the British Pound moved in a tight range on Monday against the Greenback in the early part of the Asian session with no real data out to help with trade. The subdued trade saw the Sterling move in a tight 15 point range for the most part of the day as the GBP touched lows of 1.6870 against the US. The higher yielding currencies had slightly more volatility due to Local and Chinese data and the Sterling gained across the board taking advantage of weaker than anticipated figures. The British Pound managed to gain 10 points on the back of weak Chinese data touching highs of 1.9501 against the Kiwi however had much larger gains against the Australian dollar. The Aussie performed weakly domestically with poor Building Approvals and when the inadequate Chinese figures came through later on the GBP managed to touch highs of 1.8242 over half a cent up on the open. Overnight the British Pound managed to drift only moderately lower in a day with limited trade volumes due to a holiday in the UK. Strong US figures helped the Greenback however this only eventuated in a moderate lift for the US dollar as we see the GBP open slightly lower today at 1.6865 against the US dollar. The British Pound followed a similar path against the New Zealand dollar losing over 60 points against a broadly stronger Kiwi overnight opening at 1.9418. However the Aussie showed little volatility and opens at similar levels today against the GBP of 1.8180. Today investors will focus on the cash rate from the Australian Reserve bank and overnight the Services PMI out of the UK for direction.

• We expect a range today of 1.8135 – 1.8245

Majors:

The EUR as expected did not really begin its week until the open of the US market on Monday. The Euro opened at 1.3874 against the Greenback however barely moved in subdued trade touching highs of 1.3885 and lows of 1.3864.

Overnight Investors watched as strong US figures were overshadowed by the continuing conflict in the Ukraine. The worry has become that the US may be forced to intervene in this escalating crisis which has the potential to slow down the US economy’s recovery. The Greenback’s fall however was cushioned by a strong local data release during US trade. The institute of supply management’s non-manufacturing purchasing managers index increased to a 5 month high coming in at 55.2 for April. This was from a previous figure of 53.1 in March and was far better than forecasts of 54.1. These figures dampened the Euro gains on the Greenback and today we see the Euro slightly stronger than yesterday at 1.3875 against the US dollar. Today investors will turn their eyes to the Trade Balance in the US for direction.

Data releases:

• AUD: Trade Balance, Cash Rate, RBA Statement
• NZD: No Data
• JPY: Bank Holiday
• GBP: Halifax HPI m/m, Services PMI
• EUR: Spanish Unemployment Change, Spanish, Italian and Final Services PMI, Retail Sales m/m, ECOFIN Meetings
• USD: Trade Balance, IBD/TIPP Economic Optimism, FOMC member Stein Speaks