Daily Forex Commentary 16/8/2010

:: Australian Dollar: The Australian Dollar opens a shade lower on Monday at 0.8928 as risk aversion keeps a lid on high-yielding currencies. Whilst the Aussie re-captured US90 cents throughout local trade on Friday, the gains were short-lived as the greenback strengthened across the board amid speculation the Bank of Japan may intervene to curb gains in the Yen which is hindering the nation's recovery. Economic data in the United States on Friday also spooked traders with U.S retail sales in July climbing at 0.4 per cent which was below market expectations and added further evidence, if any was needed, that global growth is stalling. There is no major local economic data scheduled for release today however tomorrow sees the all-important release of the minutes from the RBAs August monetary policy meeting.

- We expect a range today in the AUD/USD rate of 0.8900 to 0.8965

:: Great Britain Pound: Pound Sterling opens largely unchanged against the greenback on Monday at 1.5590. The currency hit an intraday high of 1.5678 early in the session but fell away after local data revealed there was very little change in U.K house prices in July. Recently, the Bank of England pledged to maintain emergency stimulus for the economy and keep interest rates at record low levels. Meanwhile, the pound opens higher against both the Australian Dollar (1.7460) and the New Zealand Dollar (2.2070).

- We expect a range today in the GBP/AUD rate of 1.7425 to 1.7500

:: New Zealand Dollar: Despite stronger-than-expected retail sales data released on Friday, the kiwi is back under US71 cents and opens the new week at 0.7070 as risk aversion keeps a lid on high-yielding currencies. Retail sales rose by 1.3 per cent in June quarter which was better than expected and the largest rise since the March quarter of 2007. The data gave the kiwi a strong boost above 0.7100 during local trade before reaching a 24-hour zenith of 0.7182 during early European trade. However, the greenback strengthened across the board as U.S. economic data continues to point to a slowdown in global growth pushing investors away from riskier assets.

- We expect a range today in the NZD/USD rate of 0.7020 to 0.7110

:: Majors: The Euro opens the new week lower at 1.2760 despite strong German economic growth data released on Friday. The 16-nation currency rallied early in the session to a high of 1.2905 after it was revealed that Germanys economy powered ahead in the second quarter at a rate of 2.2 per cent. The gains on the currency were short-lived however as Euro Zone growth announced later in the session came in at a rather more subdued figure of 1 per cent as consumer confidence and domestic demand remain low. In the United States, University of Michigan index of consumer confidence rose in August to 69.6 whilst U.S. retail sales climbed by 0.4 per cent in July which was lower than market expectations. The greenback strengthened across the board and most notably against the Japanese Yen as investors move away from bets on further Yen gains. The big dollar opens today at 86.17, not far beneath Fridays high of 86.36 amid speculation of Bank of Japan intervention.

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