Forex Daily Commentary

Aussie and Kiwi Dollars / British Pound, March 08

Aussie and Kiwi Dollars: The Aussie benefitted from stronger than expected jobs figures from the US on Friday. Unemployment and Payroll data improved, causing investors to shift into riskier assets, in this case, the Aussie and the Kiwi. AUD/USD opens up at 0.9120 this morning, after reaching a high of levels above 0.9130. Economists are already talking of a possible short term correction, as investors take profit on long positions and sell the Australian dollar. GBP/AUD opens slightly lower at 1.6630, but given the growing divergence in interest rates we could easily test last week’s lows of below 1.6500. In New Zealand better than expected manufacturing and home build figures pushed the Kiwi above 0.7000 against the dollar and below 2.1700 against the pound. Seasonally adjusted residential building rose 7.4% in the December quarter, and manufacturing sales rose 3.1% in the same period. Although recent economic data has been better than many expected, it is unlikely that the RBNZ will raise rates at its Wednesday policy meeting. Rates are likely to remain at 2.5%.

- I expect a range today in the GBP/AUD rate of 1.6500 to 1.6700

- I expect a range today in the GBP/NZD rate of 2.1500 to 2.1700

GBP/EUR, March 08, 2010

Euro: Good news for Greece this weekend, French premier Nicholas Sarkozy has stated he would work to support the Greeks and assist should the need arise. In a statement to EU leaders, Sarkozy added that “whilst Greece doesn’t need assistance right now, we have the measures, we are ready, we are determined”. Clearly positive news for the Eurozone and the ailing southern states who have until now, looked for a route out of this downturn without turning to fellow EU members. Greece’s Papandreou has also become more vocal about his contempt for speculators, talking this weekend about the market in CDS (Credit Default Swaps, a form of insurance for bonds). In conjunction with Bernanke in the US, the EU is looking to introduce measures that may curb excessive, and thus detrimental, trading in these obscure derivatives. All of this news is positive for the Euro, and we open at 1.3690 and 0.9020 against the dollar and the pound respectively. It is likely that further positive news from Greece and the EU regarding fiscal support will support the Euro in the short to medium term. In other news, Germany’s finance minister Wolfgang Schaeuble has indicated that his government is already thinking of possible alternatives to helping a failing state, and talk of setting up an IMF style European monetary fund will buoy the 16 member single currency.

- We expect a range today in the GBP/EUR rate of 1.1050 to 1.1160

GBP/USD, March 08, 2010

United States Dollar: The dollar weakened slightly this morning after a string of positive news flows from Europe (see below). The story wasn’t as positive in the UK however, with continued talk of the possibility of a hung parliament in the upcoming elections. The Confederation of British Industry (CBI) has stated that the Government and Alistair Darling must use the final budget before the election to make efforts to slash the deficit and improve Britain’s long term finances. Many note however, that this is unlikely, as Labour would not want to “rock the boat” and lose votes before May. This is likely to subdue any kind of rally for the pound. Last week was a volatile one for sterling, trading as low as 1.4785 on Monday 1st March, up to levels above 1.5160 on Friday. Despite the persistent talk of election worries, the pound crawls higher, and we open at 1.5180.

- I expect a range today in the GBP/USD rate of 1.5100 to 1.5275

GBP/AUD, March 08, 2010

Great Britain Pound: Pound Sterling (1.5125) opens higher on Monday after a report in the US on Friday night showed fewer jobs were lost than expected spurring demand for riskier assets and higher-yielding currencies. The pound was little-changed during the local session after UK producer prices rose in February as higher commodity prices sustained inflation, which is currently running above the governments 3 per cent ceiling. The pound has slumped this year on budget deficit concerns. Meanwhile, the pound opens lower against both the Australian Dollar (1.6660) and the New Zealand Dollar (2.1690).

- I expect a range today in the GBP/AUD rate of 1.6600 to 1.6750

Majors, March 08, 2010

Majors: The greenback and Japanese Yen were both weaker across the board after the US non-farm payrolls report was released on Friday night. The dollar hit a 10-day high against the Yen at 90.20 soon after the data which revealed a loss of 36,000 positions in February after a revised 26,000 decrease in January. The report was better than expected, leaving the jobless rate at 9.7 per cent, spurring demand for riskier assets and higher-yielding currencies. Meanwhile, the Euro (1.3625) firmed as EU member nations continue working on a contingency rescue plan for Greece. In overnight trade, the Euro moved from a low of 1.3529 to close near its session highs around 1.3623.

AUD/USD, March 08, 2010

Australian Dollar: The Australian Dollar has managed to hang onto its recent gains and opens the new week at 0.9060. During Fridays local session, the unit consolidated around the US90 cent mark and traded in a narrow band ahead of U.S. employment data. The eagerly-awaited jobs report came in better than expected with the unemployment rate holding at 9.7 per cent as payrolls dropped by 36,000. The data prompted a spike in the Aussie to a session-high 0.9090 on optimism the global economic recovery may be gathering pace. Meanwhile, the Aussie is sharply higher against the Japanese Yen and opens at 82.00 compared to Friday’s opening level of 80.24.

- I expect a range today in the AUD/USD rate of 0.9040 to 0.9100