Daily Forecast - 3/2/2010

:: Australian Dollar: The Australian Dollar opens lower today at 0.8840 after a busy 24 hours. In a decision that surprised financial markets, the Reserve Bank of Australia left interest rates on hold yesterday at 3.75 per cent causing the currency to dive one US cent in a matter of minutes. The central bank governor Glenn Stevens said in the accompanying statement that it is appropriate to hold a steady setting of monetary policy for the time being. Mr Stevens also made it clear that rates are likely to rise in the future if inflation remains consistent with the target over the medium term. Meanwhile, in offshore trade, the unit recaptured some of the local session's losses working its way back up to 0.8845 on the back of stronger gold and commodity prices.

- We expect a range today in the AUD/USD rate of 0.8810 to 0.8880

:: Great Britain Pound: The Sterling opens this morning at 1.5975 versus the big dollar. Overnight the UK experienced some positive economic data as PMI Construction was announced to be 48.6. The results exceeded market expectations and showed faint signs of a recovery in the construction sector. The Pound continued to gain during overnight trade hitting a high just beneath 1.6000 as investors look towards today's Services PMI, housing prices and consumer confidence figures for clues in anticipation of the Bank of England's decisions for interest rates and their stimulus program. Meanwhile, the pound is higher against the Australian Dollar (1.8020) and weaker against the New Zealand Dollar (2.2440).

- We expect a range today in the GBP/AUD rate of 1.7950 to 1.8090

:: New Zealand Dollar: The New Zealand Dollar opens higher today against the greenback at 0.7100 and is being supported by stronger commodity prices. The kiwi moved lower during the domestic session on Tuesday after wages growth data came in weaker than expected. Salaries rose by 1.9 per cent in the year to December, for the lowest annual pace since 2001 suggesting to the market that employment is likely to remain flat. During overnight trade, the unit moved between a low of 0.7038 after Australia's surprise decision to leave interest rates on hold yesterday afternoon up to this morning's opening level.

- We expect a range today in the NZD/USD rate of 0.7075 to 0.7140

:: Majors: The big dollar opens marginally weaker against the Euro (1.3950) as gold and commodities rallied to their highest levels in two weeks increasing demand for higher-yielding currencies (with the exception of the Australian Dollar). After a series of heavy falls recently, the Euro edged higher for a second consecutive session to an overnight high of 1.3974. the European Central Bank meet tomorrow night and are widely tipped to leave interest rates on hold at 1 per cent. Meanwhile, the Japanese Yen (90.34) remains strong and despite the nation's exporters being less competitive at these levels, central bank intervention remains unlikely.

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