Daily Forecast - 2/2/2010

:: Australian Dollar: This morning the AUD opens higher at 0.8906 against the greenback regaining more than 1% from an intraday low of 0.8787 on Monday. The Aussie rebounded as positive growth indicators for China and the US restored investor confidence in the recovery of the global economy. The Reserve Bank of Australia is expected to increase the cash rate today by 25 basis points to 4.00 per cent as surges in employment and housing prices contribute to inflationary pressures. Crucial for the near-term direction of the Aussie will be the statement after the announcement, specifically any mention of rates now being at a neutral setting which may see the currency come under renewed downward pressure.

- We expect a range today in the AUD/USD rate of 0.8840 to 0.8930

:: Great Britain Pound: Pound Sterling (1.5950) opens flat against the greenback after weak economic data released overnight raised concerns that the economy is stalling. Home prices are down 0.8 per cent from a year earlier whilst data from the Bank of England revealed mortgage approvals declined in December. The central bank is almost certain to keep its key interest rate at a record low 0.5 per cent when it meets later this week. Meanwhile, the pound is sharply lower against both the Australian Dollar (1.7900) and the New Zealand Dollar (2.2500).

- We expect a range today in the GBP/AUD rate of 1.7840 to 1.8000

:: New Zealand Dollar: The New Zealand Dollar opens higher today at 0.7080 after a bout of positive risk sentiment overnight. The kiwi has been under pressure lately and spent most of yesterday's local session hanging onto support around the US70 cent mark despite comments from central bank governor Alan Bollard that interest rate increases may be needed at the first sign of if inflationary pressures. During the offshore session, the kiwi moved steadily higher to a 24-hour peak of 0.7094.

- We expect a range today in the NZD/USD rate of 0.7040 to 0.7120

:: Majors: The Euro (1.3920) advanced marginally against the greenback overnight to break a four-day losing streak. After hitting 7-month lows in recent days, a bout of profit-taking on the 16-nation currency was prompted after some much-needed positive economic data. A gauge of Euro Zone manufacturing came in at 52.4 in January compared to 51.6 in December. The European Central Bank is almost certain to keep its main lending rate unchanged at 1 per cent when it meets this Thursday. Meanwhile, the big dollar advanced against the Japanese Yen (90.65) as the Institute for Supply Management's manufacturing index rose sharply in January to 58.4 signalling to investors the economic recovery is gathering pace.

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