Daily Forex Commentary

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Thursday, 17 May 2012 - Market Commentary

By Michael Judge

New Zealand Dollar

The New Zealand Dollar fell to a five-month low against its US Counterpart yesterday as investor’s appetite for risk remained subdued. With the European Central Bank announcing overnight that they will temporary stop lending to Greece’s banks, the Kiwi was sold to an overnight low of 0.7687. In what has been tumultuous week for the New Zealand Dollar, the fact Greece’s three main political parties have been unable to reach any sort of agreement since elections on May 6, shows any type of solution remains a while off. Receiving only a modest boost from better than expected Industrial Production figures out of the US as well as relatively bearish Federal Reserve Minutes the New Zealand dollar opens this morning close to a full cent weaker at a rate of 0.7687.

We expect a range today of 0.7630 – 0.7730

Australian Dollar

Despite consumer confidence which posted a modest rise 0.8 percent for May the Australian dollar was sold off for much of yesterday’s local session with ongoing fears surrounding Greek elections sapping the life out of the local unit. Initially trading to late afternoon low of 0.9869 there was some relief for investors late in offshore trade following news that Federal Reserve Policy makers are considering further monetary easing, hence diminishing the attractiveness of the US Currency. Whilst the Australian Dollar has managed to recover some of its earlier loses opening this morning at a rate of 0.9912, the bias still remains towards the downside with Political uncertainty throughout Europe set to remain a key driver behind global risk sentiment in the weeks ahead. 

We expect a range today of 0.9850 – 0.9980

Great British Pound

The Great British Pound weakened the most in a month yesterday after Bank of England Governor Mervyn King voiced concerns over the euro-zone crisis and the fallout effects for UK’s economy. As well as cutting growth forecasts for Britain’s economy Mr King’s comments have again fuelled speculation that Policy Makers will resume their program of bond purchases which were halted earlier in the month. Trading to an overnight low of 1.5988 against its US Counterpart the Sterling has recovered very little this morning, currently swapping hands at a rate of 1.5992. In an overall disappointing day of trade the woes of the Sterling appear relatively minor when compared to the sell off witnessed across the commodity backed currencies this week as the Sterling again opens stronger against both the Aussie (1.6046) and the Kiwi (2.0807).

We expect a range today of 2.0750 – 2.0860

Majors:

The risk off theme continued across currency markets overnight, with the overall direction remaining the same, downward. The Euro declined against its US Counterpart slipping to fresh lows of 1.2680 after the European Central Bank said it will temporary stop lending to some Greek Banks in attempts to protect their own balance sheets whilst mitigating risks. Whilst the Euro fell, the Greenback strengthened only slightly following the release of US Federal Reserve minutes  showing many policy makers still believe further stimulus measures may be warranted should a loss of momentum in economic growth occur. In a clear sign central bankers remain cautious given Europe’s ongoing debt crisis any further Quantitative easing would surely see another round of Greenback weakness, regardless of overall sentiment. Whilst the bears were still out in force last night US Industrial Production figures managed to surprise on the upside as did Housing starts for the world’s largest economy.  Meanwhile this morning the US Currency has managed to again open stronger against the Japanese Yen at a rate of 80.196

Data releases

AUD:

MI Inflation Expectations

NZD: PPI Input q/q

JPY:

 Prelim GDP q/q

GBP: MPC Member Weale Speaks  

EUR:

French and German Bank Holiday    

USD:

Unemployment Claims, Philly Fed Manufacturing Index, CB Leading Index m/m

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