Forex Forecast 03/11/2009

:: Australian Dollar: The Australian Dollar opens at 0.9022 after a volatile session on Monday. With local equities opening in negative territory the Aussie fell in quick fashion down to an intraday low of US89 cents. However, stronger-than-expected local economic data in the form of third quarter house prices pushed the unit back above US90 cents. The data is one more piece of evidence underpinning the case for further hikes in official interest rates by the Reserve Bank of Australia. Markets have priced in a 25 basis point increase after today's meeting. Any such announcement will take place at 2:30pm AEDT.

- We expect a range today in the AUD/USD rate of 0.8940 to 0.9060

:: Great Britain Pound: Pound Sterling (1.6380) fell for a second consecutive session ahead of this Thursday's Bank of England (BoE) policy meeting. During overnight trade, the pound moved between a high of 1.6477 to a session low of 1.6327. Weighing on the pound is the prospect that BoE policy makers may decide to expand asset purchases by 50 billion pounds to 225 billion pounds to help revive the economy. Meanwhile, the pound has lost ground against both the Australian Dollar (1.8160) and the New Zealand Dollar (2.2850).

- We expect a range today in the GBP/AUD rate of 1.8080 to 1.8260

:: New Zealand Dollar: The New Zealand Dollar opens lower at 0.7150 against the greenback today after a volatile session on Monday. The kiwi was sold heavily in early morning trade yesterday down to 0.7080 amid renewed concerns the global recovery may take longer than previously thought. Profit-takers pounced taking the unit to intraday high above US72 cents. Local labour cost data and average hourly earnings are due for release today but are not expected to have a major impact on the currency. Meanwhile, on the cross-rates, the kiwi is trading at 0.7930 against the Australian Dollar.

- We expect a range today in the NZD/USD rate of 0.7100 to 0.7225

:: Majors: The big dollar opens marginally lower against both the Euro (1.4756) and the Japanese Yen (90.36) after better-than-expected economic data releases in the United States overnight. The Institute for Supply Management's U.S. manufacturing index rose to a 3-year high of 55.7 in October spurred on by a surge in production, whilst pending home sales increased 6.1 per cent in September. Both sets of numbers helped put risk back on the table and increased demand for higher-yielding assets. The U.S. Federal Reserve will release its monetary policy statement on November 4 where borrowing costs are expected to remain unchanged.

:: Data Releases: