Sentiment improves, Greenback rallies

Australian Dollar:

Asian equities enjoyed a solid bounce yesterday, suggesting downward moves from Monday’s horror session were substantially overdone. With a sense of calm finally ensuring, sentiment was notably bolstered yesterday afternoon after The People’s Bank of China lowered the lending rate by 25 basis points, relaxing also the amount of capital the nation’s largest lenders must hold. Whilst funding and liquidity levels have started to normalise, stability over the past 24 hours has favoured more so the Greenback off the back of heightened expectations which now surround a Fed rate hike this year. Opening lower this morning the Australian dollar currently buys 71.26 US Cents.

• We expect a range today of 0.7080 – 0.7180

New Zealand Dollar:

Following a period of heightened volatility the New Zealand dollar has stabilised overnight with ranges normalising somewhat when valued against its US Counterpart. Buoyed by the short-term actions of Chinese policymakers who have attempted to calm markets following Monday’s rout, the broader implications of instability within China has been there for all to see during the early parts of this week. Opening steady this morning buying 64.72 US Cents, stock market outcomes in China today followed by local trade data for July will be an important ingredient towards determining short-term direction.  

• We expect a range today of 0.6420 – 0.6520

Great British Pound:

Investors have favoured a move back into US dollar dominated assets over the past 24 hours, with signs of improved global stability simply enhancing the likelihood the US Federal Reserve will raise interest rates this year. Whilst Fed officials had previously sighted inflation as a concern, speculation has mounted that a lack of offshore demand may louden the dovish voices. Unable to keep pace with a stronger dollar the Great British Pound is lower against the Greenback (1.1516) the Aussie (2.2002) and the Kiwi (2.4223).

• We expect a range today of 2.1900 - 2.2150

Majors:

The Greenback has enjoyed an impressive fightback over the past 24 hours, gaining for the first time in five days when valued against a basket of other major currencies. Jumping by a solid 1 percent when valued against the Euro (1.1516), the main trigger for the move higher came from China after policy makers reactivated to the most recent signs of instability by cutting interest rates for the second time in two months. In a statement which followed the POBC’s decision, policy makers communicated that the task of stabilising growth whilst minimising disruptions was proving difficult. During a session defined by improved risk flows the Greenback has also notched up some impressive gains versus the Yen which had earlier reached an abrupt seven-month high on Monday. In the absence of any further flare ups to broader risk gauges investors look toward macro flows from the United States as well as additional rhetoric from the US Federal Reserve this evening.

Data releases

• AUD: RBA Gov Steven Speaks
• NZD: Trade Balance    
• JPY: No data today     
• GBP: No data today  
• EUR: No data today
• USD: Core Durable Goods Orders m/m, FOMC Member Dudley Speaks, Crude Oil Inventories