Daily Forecast 29/10/2009

:: Australian Dollar: The Australian Dollar opens sharply lower this morning against the greenback at 0.8964 after yesterday's key inflation data. September quarter CPI rose 1 per cent for an annualised reading of 1.3 per cent with both figures marginally higher than the market had been expecting. The Aussie eventually moved down during afternoon trade beneath US91 cents as the data indicated a potential 25 basis point rate hike next week, rather than the 50 points which has been touted recently in some quarters. In overnight action, the unit was sold down to a low of 0.8962 after weaker-than-expected U.S. home sales data dampened demand for high-yielding currencies.

- We expect a range today in the AUD/USD rate of 0.8920 to 0.9030

:: Great Britain Pound: Pound Sterling opens largely unchanged from this time yesterday at 1.6381 against the greenback, but endured a volatile 24-hour session. The Pound was sold to an intraday low of 1.6285 after a poor lead from the UK stock market, which lost over 2 per cent on Wednesday. The currency recovered somewhat and briefly traded as high as 1.6466 before falling back down to today's opening level after weaker-than-expected U.S. home sales data had traders moving back into the Japanese Yen and the greenback. Meanwhile, the pound is sharply higher against both the Australian Dollar (1.8220) and the New Zealand Dollar (2.2460).

- We expect a range today in the GBP/AUD rate of 1.8120 to 1.8300

:: New Zealand Dollar: The New Zealand Dollar opens sharply lower today at 0.7267 on the back of recent risk aversion and a temporary move away from the high-yielding currencies which have enjoyed a stellar run of late. In local trade on Wednesday, the kiwi mirrored moves in its trans-Tasman rival moving to an intraday low beneath US74 cents. New Zealand business confidence showed that 48 per cent of companies surveyed expect an improvement in business conditions in the year ahead. The Reserve Bank of New Zealand reviews the Official Cash Rate (OCR) this morning where no change is expected to the prevailing level of 2.50 per cent.

- We expect a range today in the NZD/USD rate of 0.7180 to 0.7325

:: Majors: The greenback and Japanese Yen rose for a fourth-straight session after weaker-than-expected U.S. housing data dampened demand for higher-yielding currencies. The EUR/USD opens at 1.4713 after hitting an overnight low of 1.4699 - its weakest level since October 12. Sales of new homes in the United States unexpectedly fell in September by 3.6 per cent to an annual pace of 402,000, which was well below the most pessimistic of economist's forecasts. With the end of the first homebuyer tax credit looming, the data highlights the importance of government stimulus to the tentative economic recovery. Meanwhile, the Japanese Yen has climbed overnight and opens this morning in Sydney at 90.75.

:: Data Releases: