Daily Commentary - 12/10/2009

:: Australian Dollar: Comments by U.S Federal Reserve Bank Chairman Ben Bernanke relating to interest rates and inflation kept a lid on the Aussie dollar heading into the weekend and it opens this morning relatively unchanged from Friday''s Asian close at 0.9035. The AUD/USD did however retest highs made earlier in the week at 0.9085 but fell short of the mark as demand for the Greenback emerged following better than expected U.S trade balance data. The week ahead sees the release of several sentiment surveys with both the NAB and WBC releasing various results however the main focus locally will be RBA governor Stevens speaking in Perth on Thursday.

- We expect a range today in the AUD/USD rate of 0.8975 to 0.9075

:: Great Britain Pound: Despite the U.K Trade Deficit narrowing to its lowest level since June 2006 the Pound Sterling continued to decline against the Greenback falling to a low of 1.5835. Of particular concern with the result was the fact both imports and exports fell, outweighing any benefit of a better than expected September Producer Prices result which was also released on Friday. The GBP opens this morning on its lows against the USD while the GBP/AUD cross rate continues to make new lows exchanging at 1.7525.

- We expect a range today in the GBP/AUD rate of 1.7485 to 1.7580

:: New Zealand Dollar: Talk of interest rate increases out of the U.S following FOMC head Bernanke's comments, although premature, was enough to push the Kiwi down from 74 cents to test 73 cents on Friday. The NZD opens this morning exchanging at 0.7335 against the USD whilst it has also weakened against the AUD trading at 1.2320. This morning's New Zealand House Price data will give the Kiwi some further direction ahead of what shapes to be an important week on the data front with the release of both Retail Sales and inflation on Wednesday and Thursday respectively.

- We expect a range today in the NZD/USD rate of 0.7290 to 0.7385

:: Majors: It was a relatively subdued European trading session on Friday with the market seemingly uninspired by a raft of German and French economic data. EUR/USD traded sideways between 1.4710 and 1.4740 until early North American investors came to the fore in the lead up to August U.S Trade Balance data. The deficit was expected to continue to widen from a massive 31.9 billion USD to around 33 billion however the reduction to 30.7 billion caught the market by surprise somewhat. The better than expected data sparked an initial drop to 1.4675 however with equity markets finishing the session up almost 1% traders sold the Greenback near the close taking EUR/USD back to 1.4720. The big mover was the USD/JPY which rallied from 88.70 to finish the week at 88.80 as comments from Fed Chairman Ben Bernanke triggered some short covering. He said that ....as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. It does however appear that a move to a more restrictive monetary policy stance is still a long way off as the chief did say accommodative policies will likely be warranted for an extended period.

:: Data Releases: