Daily Forecast - 11/2/2010

:: Australian Dollar: The Australian Dollar opens slightly lower today against its U.S. counterpart at 0.8755. Local trade was lack-lustre at best on Wednesday with a small rise towards US88 cents on the back of a positive lead from the region's equity markets. The Aussie came up against some sturdy resistance however and edged lower throughout the remainder of the session after consumer confidence dropped in February. The Westpac/Melbourne Institute index eased 2.6 per cent to 117 from 120.1 in January. In overnight trade, the unit moved between 0.8740 and 0.8789. Looming large for the Australian Dollar this morning is the all important unemployment data (employment rate is expected to come in at 5.6%; previous 5.5%) for January 2010 release at 11.30 Sydney time. The market will be keeping a firm eye on this release as it provides further interest rate clues for 2010.

- We expect a range today in the AUD/USD rate of 0.8720 to 0.8820

:: Great Britain Pound: A raise in the Industrial Production reading for December (actual 0.5%; expected 0.2%; previous 0.4%) had a encouraging effect on CABLE in early Europe last night pushing it to a high of 1.5750 before comments from Bank of England Mervyn King and the Quarterly Inflation Report put the brakes on the Pounds advance. Governor King stated that the BoE may still have to pump more money into the UK's already fragile economy and that inflation may remain well below target over the coming years. In addition to the this, the report indicated that the strength of the recovery is highly uncertain. The reaction from the market was to sell the Pound almost immediately with it eventually bottoming out at 1.5570 against the Greenback. Against the Australian and New Zealand Dollar, the Pound is marginally steady and at time of writing was changing hands at 1.7790 and 2.2450.

- We expect a range today in the GBP/AUD rate of 1.7650 to 1.7850

:: New Zealand Dollar: The New Zealand Dollar opens almost unchanged against the Greenback on Thursday at 0.6936. Compared to the recent volatility, the Kiwi was very subdued throughout local trade yesterday crawling to a high of 0.6965 on the back of a positive session on equity markets. Adding to the Kiwis woes in the local session yesterday was the latest round of local credit card spending (+0.5 per cent in January), which suggested that any recovery in the retail sector is patchy at best, pushing the Kiwi to an intraday low of 0.6938. Offshore the trend continued with the Kiwi limited to a range of 0.6890 to 0.6960. Governor Allan Bollards recent comments about the state of the New Zealand economy and future growth continue to hinder offshore investors enthusiasm to buy the NZ Dollar and hence the unit is finding strong resistance at breaking through the 70 cents mark.

- We expect a range today in the NZD/USD rate of 0.6875 to 0.6975

:: Majors: News out of Europe last night that Germany and other EU members were considering loan guarantees for Greece and other troubled European nations (Portugal, Spain) instilled some confidence and optimism back into the markets which has been fearful of late about sovereign debt spiralling out of control in these 3 countries. The news helped the EURO hold onto its recent gains and saw the 16 nation currency move back above the 1.37 mark since hitting a 9 month low of 1.36 against the Greenback last Friday. During the offshore session EURUSD traded between 1.3673 and 1.3813. Across the Atlantic, a 10.4% increase in the Trade Balance for December improved US Dollar sentiment across the board, with both imports and exports showing healthy gains for the month suggesting that the US economy is in recovery mode. The actual number for December was US40.2 billion, higher than market expectations of US35.8 billion compared with previous reading of US36.4 billion. Against the Pound, the Greenback is up and is changing hands at 1.5584 and down versus the Yen at 89.92.

:: Data Releases: