Australian Dollar
Australia’s economy grew by 1.3% in the first quarter of 2012, confidently blowing expectations out of the water. An immediate reaction was seen in the local exchange rate and a 75 point rally ensued, taking the Aussie from pre-announcement levels of 0.9770 to 0.9845 within the hour. Other stars were aligning for the local unit as well, with speculation China may be in the market to further ease monetary policy, as well as noises from Fed officials as to further quantitative easing in the United States. Both these additional factors, coupled with a more accommodative outlook ECB helped the Aussie to highs above 99 cents for the first time since May 23. Trading this morning around 0.9920, employment figures locally are set to potentially alter the Aussie’s direction, where analysts are predicting the rate of unemployment is set to rise back to 5.1%.

We expect a range today of 0.9850 – 0.9950

New Zealand Dollar
Talk of possible QE3 in the United States, as well as speculation China will ease monetary policy, and a robust Australian economy all served to lift the New Zealand Dollar higher yesterday, as risk appetite started to look convincing. Opening levels of 0.7560 turned out to be lows for the day and by the move to European hours the Kiwi was changing hands at 0.7620. Further speculation that officials may be coming closer to a solution for Spain’s banking crisis, along with an admission by the ECB they stand ready to act if required, helped the rally continue to three week highs this morning above 77 cents.

We expect a range today of 0.7650 – 0.7740

Great British Pound
A boost in general risk appetite after last night’s ECB meeting has combined with resultant USD weakness from recent QE3 talks to drive Cable higher over the past 24hrs. Locally, construction PMI posted an encouraging 54.4, still comfortably above the critical 50.0 mark, and this contributed to the Pound moving through 1.5400 to briefly break 1.5500 in its domestic session. Drifting back slightly, Cable trades this morning at 1.5490 although action on the antipodean cross rates has been a little less favourable for those long GBP. A stellar GDP figure in Australia sent the GBP/AUD to trade just off lows of 1.5600; the risk-sensitive Kiwi has pushed the Pound lower to 2.0100 as of this morning. Ahead this evening the Bank of England’s Monetary Policy Committee has its monthly meeting to set monetary policy and this, as always, will prove critical to the direction of the Pound.

We expect a range today of 1.5550 – 1.5690

Majors
The euro has rallied back to erase almost its full set of losses recorded since Monday last week, as confidence has been re-instated in the markets. ECB’s Draghi announced they would leave interest rates on hold at 1% however they did acknowledge that despite their belief governments should be responsible for their own political messes, they will stand ready to act if necessary. Members of the US Federal Reserve have also been touting that they must be ready to ‘do even more’, in the words of San Francisco Fed President John Williams last night, and thus risk is back on the table and the Greenback is under pressure. EUR/USD has pushed as high as 1.2580 and with talks beginning as to a way to bailout Spain’s banks without imposing the same severe restrictions on the sovereign faced by Greece, Portugal and Ireland, the Euro may have the potential to squeeze slightly higher. Spain are set to auction 10 year debt tonight, as are the French, and Fed Chairman Ben Bernanke is scheduled to testify at the Joint Economic Committee in Washington DC. Despite hype of further QE3, the USD/JPY has moved higher throughout yesterday to trade this morning at 79.25.

Data releases:

AUD: Employment Change; Unemployment Rate; AIG Construction Index

NZD: No data due for release

JPY: Leading Indicators

GBP: Official Bank Rate; Asset Purchase Facility; MPC Rate Statement; Halifax HPI m/m

EUR: Spanish 10-y Bond Auction; French 10-y Bond Auction

USD: Unemployment Claims; Natural Gas Storage; Consumer Credit m/m