Daily Forex Commentary 19/8/2010

:: Australian Dollar: The Australian Dollar opens lower today against the greenback at 0.8980. The Aussie moved lower during yesterday's domestic session after wages data provided further evidence the Reserve Bank of Australia is likely to leave rates on hold. In what was a fairly lacklustre session, the local unit retreated towards 0.9020 as total hourly rates rose a modest 0.8 per cent in the June quarter for an annualised rise in the wage cost index of 3.0 per cent. Offshore, support gave way around the US90 mark which saw the unit trade as low as 0.8970 as BHP Billiton upped their bid by $1bio for Potash Corp, therefore pressuring the Aussie and strengthening the Canadian Dollar.

- We expect a range today in the AUD/USD rate of 0.8940 to 0.9000

:: Great Britain Pound: Pound Sterling recovered from a three-week low overnight of 1.5497 after minutes of the Bank of England's last meeting revealed that no policy makers voted to step up bond purchases. The monetary policy committee also voted 8 - 1 in favour of keeping the benchmark interest rate at an all time low of 0.5 per cent. Against the greenback the pound opens at 1.5591 in the lead-up to tonight's July retail sales data in which the market is expecting slower growth. Meanwhile, the pound is stronger against the Australian Dollar (1.7350) and weaker against the New Zealand Dollar (2.1840).

- We expect a range today in the GBP/AUD rate of 1.7300 to 1.7365

:: New Zealand Dollar: The New Zealand Dollar traded sideways during Wednesday's local session between US71 cents and 0.7120 due to a lack of leads both domestically and in the region. Investors continued to favour risk early in the offshore time zone taking the kiwi to a high of 0.7191 before tracking a weaker Euro down towards 0.7150. The unit opens today at 0.7135 ahead of local economic data in the form of consumer confidence and credit card spending. The kiwi has recovered somewhat against the Australian Dollar bouncing from three-and-a-half month lows of 0.7850 to this morning's opening level of 0.7940.

- We expect a range today in the NZD/USD rate of 0.7115 to 0.7150

:: Majors: The Euro received a boost early in the session hitting an overnight high of 1.2920 after European construction output rose the most in three months. Led by a rebound in Spain, construction in the 16-nation euro region increased 2.7 per cent from the previous month. The currency gains were short-lived however and the Euro succumbed to another bout of Yen strength. The Euro is trading near 6-week lows versus the Japanese Yen (109.78) and opens today against the U.S. at 1.2850. Meanwhile, the greenback fell as low as 85.18 against the Yen before reversing some of the losses as U.S. equities moved back into positive territory late in the session. A positive sales outlook from retail giant Target provided a late boost to equity market sentiment which filtered through to the big dollar (85.42).

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