Daily Forecast - 5/3/2010

:: Australian Dollar: A much larger than forecast narrowing in Australia's trade deficit added some support to the Aussie dollar in local trade yesterday however resistance above 0.9050 saw it slide lower in afternoon exchange. In overnight trade the AUD/USD traded between 0.8980 and 0.9030 and opens this morning right on the 90 cent level with the ECB and BoE both keeping cash rates on hold overnight while U.S economic data disappointed the market. Heading into the weekend direction will continue to come from developments in Europe and the all important U.S employment report with February non-farm payrolls expected to show a loss of around 70k jobs.

- We expect a range today in the AUD/USD rate of 0.8950 to 0.9025

:: Great Britain Pound: As expected the Bank of England kept interest rates on hold at 0.5% and maintained its commitment to a 200 billion GBP limit on the quantitative easing bond purchase program. The accompanying rhetoric indicated the central bank is hawkish about inflation giving the GBP/USD some much needed support which saw it exchange as high as 1.5125 overnight. The move was short lived however following ECB President Trichet's press conference where he ruled out IMF financial support for Greece triggering a flight back into the Greenback. This morning sees the GBP open at 1.5035 and 1.6685 against the USD and AUD respectively.

- We expect a range today in the GBP/AUD rate of 1.6600 to 1.6750

:: New Zealand Dollar: The Kiwi dollar traded in a narrow range during the London session bouncing between 0.6875 and 0.6915 for the majority of the session. The volatility increased however following a flight back into the Greenback as the market remained nervous about the prospects for global economic growth given the unexpected drop in U.S pending home sales and the lack of financial aid for debt stricken Greece. In what was a swift move lower the NZD/USD fell from 69 cents to 0.6850 whilst the Aussie dollar held firm taking the AUD/NZD cross rate above 1.3100 for the first time since November 2000.

- We expect a range today in the NZD/USD rate of 0.6835 to 0.6900

:: Majors: The Euro held firm around 1.3660 against the Greenback during early offshore exchange following the release of Euro-Zone economic growth data for the fourth quarter of 2009. The meagre 0.1% Q4 increase kept the annual GDP decline to 2.1%, in line with analyst forecasts. Attention however was on the ECB meeting and despite the central bank keeping rates on hold as expected the ensuing press conference by President Trichet triggered a sharp sell off on EUR/USD back to an eventual low of 1.3550. The head of the central bank announced the phasing out of several emergency measures that were introduced to combat the financial crisis however it was his comments surrounding Greece that sparked the move. He said it would not be appropriate to have the introduction of the IMF as a supplier of help quashing investors hopes that financial aid was imminent. A 7.6% decline in U.S Pending Home Sales surprised the market however this evenings employment report and the closely watched non-farm payroll result remains the main attraction for the week stateside.

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