Daily Forex Forecast 7/7/2010

:: Australian Dollar: As expected, the Reserve Bank of Australia (RBA) left interest rates on hold at 4.5 per cent. In the accompanying statement, RBA governor Mr Glenn Stevens noted that whilst underlying inflation is likely to be in the upper half of the target zone over the next year, current policy settings were described as appropriate. Meanwhile, in economic data announced earlier in the session, Australia posted its third-highest trade surplus in May of A$1.65bio on continued strong demand from China and India. The currency rallied from 3-week lows (0.8317) after the data. The Aussie opens sharply higher on Wednesday against the greenback at 0.8500, buoyed by the afore-mentioned strong economic data and positive risk sentiment throughout much of the offshore session.

- We expect a range today in the AUD/USD rate of 0.8440 to 0.8590

:: Great Britain Pound: Pound Sterling opens marginally higher today against the greenback at 1.5145. In the absence of any local economic data, the currency moved between a low of 1.5080 before nudging a two-month high at 1.5226, buoyed by a sharp rally in U.K equities, led largely by the resources sector. Traders were reluctant to take the pound any higher at this stage as the market are looking towards tomorrow's interest rate decision by the Bank of England and any accompanying statement. Meanwhile, the pound has lost ground against both the Australian Dollar (1.7780) and the New Zealand Dollar (2.1840).

- We expect a range today in the GBP/AUD rate of 1.7720 to 1.7830

:: New Zealand Dollar: The New Zealand Dollar drifted lower in local trade after the release of the NZ Institute of Economic Research quarterly survey of business opinion. The June quarter report revealed a drop in optimism and activity across all sectors of the economy suggesting to market participants the Reserve Bank of New Zealand may need to stop raising interest rates. The kiwi hit an intraday low of 0.6825. During offshore trade, the kiwi moved between a low of 0.6880 up to a high of 0.6974 as the greenback weakened across the board. The kiwi has been outperformed by the Australian Dollar overnight which sees the NZD/AUD cross rate open at 0.8135.

- We expect a range today in the NZD/USD rate of 0.6880 to 0.6975

:: Majors: In further evidence of the slow pace of economic recovery in the United States, the Institute for Supply Management's (ISM) index of the services sector fell to a four-month low in June at 53.8. The greenback weakened across the board which saw the Euro nudge a seven-week high at 1.2661. Sharp rallies in European equity markets also provided support for the 16-nation currency ahead of Thursday's interest rate announcement by the ECB and tonight's first quarter growth data. Meanwhile, the greenback remains under pressure against the Japanese Yen opening marginally lower today at 87.47. The 24-hour range was a fairly subdued 87.33 - 87.92.

:: Data Releases: