Australian Dollar
Commodity currencies were the main benefactor following the second day of Ben Bernanke’s testimony to congress, which combined with the acknowledgement of a weakening US economic recovery, QE3 rumours started flying. Subsequently the Australian dollar rallied, not only due to the fact investors began seeking higher yields but also as a direct result of Greenback weakness. Earlier in the day, the Aussie oscillated in a narrow range around 1.0300/10 resistance however a clean break was made in New York hours and this morning we sit up at 1.0360. Locally, NAB business confidence is due for release this morning however more US economic data will likely serve to move sentiment this evening.

We expect a range today of 1.0300 – 1.0400

New Zealand Dollar
The New Zealand dollar has moved higher as investors seek higher yields in a market place supported by the speculation of possible central bank support. QE3 rumours are flying again from the United States following testimony from Bernanke, along with anticipated further action from Europe and the UK as well. After drifting lower throughout Asian and European trade, the Kiwi embarked on a strong rally from intraday lows below 0.7930, rising to break 0.8000 and settle back to this handle this morning. The AUD/NZD also rallied, with the relative risk sensitivity of the Aussie weighing out, and an attempt at 1.3000 was capped at 1.2980 (0.7704). A consolidation of this move sees the pair at 1.2950 (0.7722) this morning ahead of a quiet day on the local docket.

We expect a range today of 0.7950 – 0.8040

Great British Pound
Sterling was weakened yesterday as the release of the MPC meeting minutes revealed a further interest rate cut may be on the cards. Already at benchmark lows of 0.5% another cut would take the rate at 0.25%, assuming they only action 25 basis points, and such a move may be considered after an assessment of the impact of new lending and liquidity measures on the economy. Lows in Cable were established near 1.5580, although QE3 speculation and Greenback weakness enabled a rally back above 1.5650 and it is around this level we open this morning. Commodity currencies surged as a result of the rumours and consequently the GBP/AUD trades down at 1.5100 after dipping briefly below, and GBP/NZD trades down at 1.9550. This evening, GBP investors will be watching the release of retail sales for the month of June where economist predictions have us expecting a 0.6% rise.

We expect a range today of 1.5020 – 1.5180

Majors
US Federal Reserve Chairman Ben Bernanke continued his two-day testimony to the House Financial Services Committee, in Washington DC last night and once again signs of further stimulus served to weaken the Greenback. Many are now speculating with an acknowledgement also in the beige book of a weak jobs market, along with weakening in retail sales and manufacturing in some regions, the Fed are likely to embark on a third round of quantitative easing which will directly weaken the US Dollar in the short term. Although the commodities gained the most against the Greenback, the Japanese Yen benefited in a move back below 79.00 to trade this morning at 78.80; the Euro dollar however still struggling under the weight of its own problems only managed to pare earlier losses to sit back at the same levels as this time yesterday at 1.2280. On the docket tonight, traders will be watching the US once more as it releases unemployment claims, existing home sales and the Philly Fed manufacturing index.

Data releases:

AUD: NAB Quarterly Business Confidence

NZD: No data due for release

JPY: All Industries Activity m/m

GBP: Retail Sales m/m

EUR: Current Account

USD: Unemployment Claims; Existing Home Sales; Philly Fed Manufacturing Index