Daily Forecast - 5/2/2010

:: Australian Dollar: The Australian Dollar opens sharply lower today against the greenback at 0.8650 dragged down by a lower Euro and weaker global stocks and commodity prices overnight. A surprise fall in retail sales data yesterday pushed the Aussie briefly to a fresh 6-week low around 0.8780 during morning trade. Sales were down 0.7 per cent in December and may partly explain the Reserve Bank's decision this week to leave interest rates on hold. The currency edged higher throughout the remainder of the local session ahead of a tumultuous offshore session which saw the local unit plunge to a 4-month low just above US86 cents. Fiscal deficits in European nations such as Greece, Portugal and Spain along with global growth concerns has prom pted the current bout of risk aversion.

- We expect a range today in the AUD/USD rate of 0.8600 to 0.8720

:: Great Britain Pound: The GBP opens weaker this morning at 1.5770 against the USD. The Pound sunk to 1.5730 against the Greenback; down almost 1.20% from its intra-day high of 1.5920.The Sterling fell in the wake of the Bank of England's decision to pause its asset re-purchase plans, keeping it at 200 billion pounds. The Committee will continue to monitor the appropriate scale of the asset-purchase program, and further purchases would be made should the outlook warrant them. The bank also decided to keep the cash rate at 0.5%. Meanwhile the GBP opens stronger against the AUD and NZD at 1.8200 and 2.2875 respectively.

- We expect a range today in the GBP/AUD rate of 1.8140 to 1.8300

:: New Zealand Dollar: This morning the NZD (0.6880) is one of many currencies opening weaker against the greenback. Unemployment figures from New Zealand shocked the market as it was revealed to be 7.3%, the highest in a decade. Adding salt to the Kiwi's wounds, commodity prices tumbled and the US reported an unexpected increase in jobless claims. Concern among investors heightened as the US cast a shadow over the state of the global economic recovery and caused the Kiwi to fall more than 2.5% from its intraday high of 0.7025 down to 0.6846 in offshore trade, a 5-month low. Meanwhile, the kiwi has managed to outperform the Australian Dollar overnight and opens stronger at 0.7950.

- We expect a range today in the NZD/USD rate of 0.6840 to 0.6950

:: Majors: The Euro (1.3744) fell sharply overnight and hit an 8-month low against the greenback of 1.3727 on concerns Greece, Portugal and Spain will have difficulty curbing budget deficits. The 16-nation unit fell as European Central Bank (ECB) President Jean-Claude Trichet said he was confident Greece can get its budget under control. As expected, the ECB left interest rates on hold at 1 per cent and signalled that they have no plans to raise rates anytime soon. Stocks and commodities tumbled around the world whilst the greenback strengthened against several major currencies. In times of turmoil, the U.S. Dollar benefits from its role as the world's reserve currency.

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