Australian Dollar:
We find the Aussie significantly lower this morning following some poor economic data and a sharp fall in commodities overnight. Yesterday, during Asian trade, the Aussie began its move south after China manufacturing PMI came in lower than expected at 50.6, furthering recent concerns about the Chinese economy after last month’s HSBC flash PMI also disappointed. The initial reaction wasn’t terribly negative and we held above 1.0370, but as the day dragged on, the Aussie was dragged lower as we headed towards 1.0355 at end of our trading day. The situation did not improve during offshore trade, as poor manufacturing data out of the US saw a sharp fall in our key commodities, sending the Aussie down through 1.03. The FOMC rate announcement initially saw a further dip but this has since flattened and we open at 1.0275. Looking ahead we have building approvals locally, before some more Chinese manufacturing data which could spell some further negativity for our currency.

We expect a range today of 1.0245– 1.0325

New Zealand Dollar:
Even with some disappointing Chinese PMI data, the Kiwi managed to hold ground quite well for most of yesterday, but any chance of a break above 0.86 seemed to be fading by our session’s end. With our cross Tasman counterpart taking most of the brunt of the poor China data, and AUD/NZD dropping below 1.21, there was enough flows in this cross to support the Kiwi against the greenback. That was until negative US manufacturing data added to the Chinese figures to send commodities and equities significantly lower, dragging NZD/USD below 0.85. The much awaited statement from the Fed was fairly balanced and left the door open for the $85b in bond buying to be increased or decreased as needed which has seen us level off around 0.85 in time for the open this morning. Locally there is only minor data today, but markets will likely remain subdued as Asian equities follow US indexes lower before attention turns to the ECB rate decision tonight.

We expect a range today of 0.8455– 0.8525

Great British Pound:
The pounds recovery back towards 1.56 continued overnight, and although the big figure was hard to come by, we do seem well set for a break above this level over coming days. The big piece of local data last night was UK PMI manufacturing which came in much better than expected at 49.8, showing a sharp improvement from last month’s figures of 48.6. With figures above 50 indicating expansion, it seems likely that the manufacturing sector may soon start supporting growth in the UK economy rather than dragging it lower. This has added to a recent string of positive data, and should keep the Bank of England from considering any further easing. Off the back of this the cable moved from 1.5540 to break above 1.5590 before a dip in equities saw gains taper off and we open this morning at 1.5565. Meanwhile bigger gains were seen against the south pacific crosses, with both currencies hurt by a drop in commodities; GBP/AUD: 1.5140, GBP/NZD: 1.8300.

We expect a range today of 1.5115– 1.5175

Majors:
With most of Europe closed for May Day public holidays overnight, most of the action in the currency markets was driven by US data and the lead up to the FOMC rate and policy announcement. Early this morning the Fed voted to keep current easing measures in place, namely buying $85b in bonds each month, which was no surprise given the recent run of poor data out the of the US. What was interesting was they stated that they were willing to increase or decrease the level of bond buying going forward on a needs basis – mainly dependant on employment and inflation. There have been several Fed members calling for the $85b level to be altered, but the fact they have also signalled they may increase it, kept markets relatively balanced and we find most currencies close to where they were prior to the announcement. Earlier in the night we saw sharp falls in several currencies, mainly the commodity currencies, as some poor manufacturing data globally saw a fall in demand for commodities such as oil, gold, aluminium and copper. In US data we saw ISM manufacturing fall from 51.3 to 50.7 while construction spending also disappointed coming in at -1.7%. After trading close to 1.3240, we now find EUR/USD close to where we left it at 1.3180, while USD/JPY is also near its Asian close of 97.35. Looking ahead, the focus tonight will be on the ECB rate announcement, where an interest rate cut appears very likely.

Data releases:

AUD:
Building approvals

NZD ANZ commodity price, Export price index, Import price index

JPY:
Monetary base

GBP PMI construction

EUR:
European Central Bank rate decision, Eurozone PMI, German PMI

USD:
Initial jobless claims, Trade balance, ISM New York