Daily Forex Commentary 20/8/2010

:: Australian Dollar: The Australian Dollar endured a lack lustre session during Asian time yesterday with the little battler limited to a 35 pip range. During the local session the AUD moved between 0.8950 and 0.8980 and it wasn't until late in the European and US sittings that the local dollar really moved, falling to a low of 0.8904 after a series of weak economic reports in the United States sparked fresh fears of more than just a slowdown in global growth. The Australian dollar has been held to ransom by offshore events this week and last night was no different. Tomorrow's general election will add further volatility for the Aussie, with expectations of tightly-contested ballot. Traders are expected to square up their AUD positions to avoid being caught short Monday morning should the election offer any surprises. The Aussie opens at 0.8926.

- We expect a range today in the AUD/USD rate of 0.8860 to 0.8945

:: Great Britain Pound: Pound Sterling (1.5590) moved higher in overnight trade after U.K. retail sales came in higher than market expectations. Sales rose 1.1 per cent from the previous month for an annualised rate of 1.3 per cent pushing Sterling sharply higher towards 1.5670. However, disappointing U.S. economic data released late in the session dampened early enthusiasm on UK and European equity markets and the currency gains were short-lived. Despite this, the pound has managed to outperform both the Australian Dollar (1.7460) and the New Zealand Dollar (2.2060).

- We expect a range today in the GBP/AUD rate of 1.7440 to 1.7510

:: New Zealand Dollar: The New Zealand Dollar was pinned to yet another 35-point range throughout yesterday's domestic session due to a lack of leads in the Asian region. Local producer price data (+1.4 per cent in the June quarter) provided support for the kiwi around US71 cents before heading into the offshore time zone around the 0.7140 area. There was considerably more action on the cross rates with the NZD/AUD rallying off multi-month lows towards 0.7965. Against the Aussie, the kiwi opens lower today at 0.7920. Against the greenback, the kiwi moved sharply lower in offshore trade and opens at 0.7060 after a series of weaker-than-expected economic reports released overnight in the United States sparked fresh fears of more than just a slowdown in global growth.

- We expect a range today in the NZD/USD rate of 0.7020 to 0.7090

:: Majors: Worse-than-expected economic data released in the United States overnight has fuelled a renewed bout of risk aversion, boosting the greenback and Japanese Yen. The Yen strengthened to 84.90 versus the big dollar after initial jobless claims in the U.S. rose by 12,000 to 500,000 in the week ending August 14. Also weighing heavily on risk sentiment was the lowest reading in 12 months for manufacturing in the mid-Atlantic States. The Federal Reserve Bank of Philadelphia general economic index fell to minus 7.7 as activity shows signs of stalling. The data pushed down the price of oil to US$74.43/barrel and sparked late sell-offs in equity markets in the U.K., Europe and the U.S. Meanwhile, the Euro opens lower today at 1.2820 after trading in a range between 1.2901 down to 1.2771 over the last 24 hours.

:: Data Releases: