Daily Forecast - 8/1/2010

:: Australian Dollar: The Australian Dollar opens lower on Friday at 0.9180 after a stronger greenback overnight weighed on the high-yielders and eroded yesterday's solid gains. Stronger-than-expected retail sales has increased the likelihood of the Reserve Bank of Australia raising rates at their next meeting in February. The Aussie spiked yesterday to an intraday high of 0.9265 immediately after the announcement that retail sales in November surged 1.4 per cent, much higher than the 0.3 per cent predicted by most economists. Markets are now pricing in a 50/50 chance of a near-term 25 basis point rate hike to 3.75 per cent. The Aussie moved steadily lower during overnight trade in the lead-up to tonight's U.S. employment data.

- We expect a range today in the AUD/USD rate of 0.9120 to 0.9225

:: Great Britain Pound: Pound Sterling opens marginally lower on Friday against the U.S. Dollar at 1.5940. As was widely forecast, the Bank of England left interest rates unchanged at 0.50 per cent and also pledged to spend the remainder of its GBP200 million bond purchase program to ensure the economy recovers. During overnight trade the pound moved between a low of 1.5895 and a high of 1.6058. The pound opens steady against both the Australian Dollar (1.7360) and the New Zealand Dollar (2.1740).

- We expect a range today in the GBP/AUD rate of 1.7250 to 1.7420

:: New Zealand Dollar: The New Zealand opens lower against its U.S. counterpart on Friday at 0.7320. Trade data for November came in lower than expected at NZ$269m. The annual trade deficit fell to NZ$846m - its lowest level since September 2002 - as both imports and exports were down 22 per cent and 16.7 per cent respectively compared to a year earlier. The local unit dipped to 0.7360 during the domestic session but rallied briefly above US74 cents by mid-afternoon as it tracked a stronger Australian Dollar higher. During overnight trade, profit-takers emerged pushing the kiwi steadily lower to this morning's opening level.

- We expect a range today in the NZD/USD rate of 0.7280 to 0.7345

:: Majors: The big dollar hit a four-month high overnight (93.39) against the Japanese Yen after U.S. economic data revealed that tonight's payrolls report will show signs of improvement. Initial jobless applications for the week ending January 2 came in better-than-expected at 434,000 in a sign that job cuts have eased and the economy is recovering. The U.S. Dollar has appreciated 8 per cent against the Yen over the last 2 months. The greenback also strengthened against the Euro overnight (1.4320) as the market positions itself for tonight's release of U.S. non-farm payrolls data and unemployment rate.

:: Data Releases: