The Reserve Bank of Australia left rates on hold yesterday stating they had already delivered ‘material’ easing over the past six months, that Europe still remains a risk and that domestic inflation remains ‘consistent with the target’. Earlier in the day a solid increase in building approvals had pushed the local unit higher however the Aussie dipped after the RBA announcement; lows near 1.0250 held and improving investor sentiment sees our dollar trade at 1.0280 this morning. Still yet to crack 1.0300 since it dropped through two months ago, the Aussie may stand a chance should investor sentiment remain supported by potential central bank action offshore although the near term focus is Retail Sales for the month of May due out this morning.
- We expect a range today of 1.0220 – 1.0320
New Zealand Dollar
An absence of local data has seen the New Zealand dollar remain in a close range over the past 24 hours with support holding at 0.8015, yet 0.8050/60 holding firm. As market sentiment tentatively improves ahead of the ECB and BOE central bank meetings later this week the Kiwi is displaying a gradual move higher and sits just below 0.8040 this morning. Solid building approvals figures and an unsurprising RBA meeting across the Tasman has seen the New Zealand dollar lose ground against its Australian counterpart and they trade this morning at 1.2790 (0.7819).
- We expect a range today of 0.7980 – 0.8070
Great British Pound
A drop in Construction PMI has highlighted further weakness in the UK economy overnight, the index dropping sharply below 50.0 although survey producer Markit did highlight the Queen’s Jubilee holiday as a contributing factor. Still, Sterling weakened slightly to session lows near 1.5660 before recovering to open this morning 1.5685. Services PMI is scheduled to follow later this evening and the much anticipated BOE meeting is booked for Thursday, where many expect the central bank to increase quantitative easing measures. Risk currencies have outperformed under current market conditions and the past 24 hours has seen the GBP/AUD move lower to 1.5250; the GBP/NZD was back below 1.9500 although it has recovered slightly to 1.9515 this morning.
- We expect a range today of 1.5190 – 1.5330
A quiet day for most of the majors saw the main focus come out of the US in the form of US factory orders. A 0.7% increase in orders following last month’s 0.7% decrease surpassed most expectations and re-assured markets that the US economy is still capable of recovery. Producer prices in the euro-zone decreased last month however and with the magnitude of the decrease larger than anticipated it only softens the ECB’s inflation argument to keep interest rates elevated. The euro touched lows of 1.2560 last night before bouncing back above 1.2600 ahead of the ECB meeting tomorrow, where most expect the central bank will act to stimulate the economy; tonight will see retail sales figures released also. The Japanese Yen gave back the gains following US manufacturing data on Monday night, USD/JPY peaking at 79.90 after US factory orders release and settling back to change hands at 79.80 this morning. Also of note is today’s Independence Day holiday in the US, thinning markets to an extent.
- AUD: Retail Sales m/m; AIG Services Index
- NZD: No data due for release
- JPY: No data due for release
- GBP: Services PMI; BRC Shop Price Index y/y
- EUR: Final Services PMI; Retail Sales m/m; Italian Services PMI
- USD: Independence DayCOMMODITIES