Australian Dollar
Bolstered risk sentiment has lifted the Australian Dollar overnight, capitalising on earlier gains made after the release of the RBA’s minutes from its June meeting. With the decision to cut rates ‘finely balanced’, the statement was not as bearish on outlook for monetary policy as many had expected and the Aussie strengthened as a result. Optimism that EU officials will work together with Greece to make the required austerity measures more politically palatable was the catalyst for the continuation of gains as the night wore on and this morning the AUD/USD trades at 1.0190 after briefly attempting to crack 1.0200. Today, locally we will be watching two sets of leading indices to predict the health of the domestic economy; overnight tonight a currently suppressed Greenback take direction from the FOMC meeting and what, if any, monetary stimulus action is undertaken. A weaker than expected stance on monetary stimulus will likely see the Greenback rally, thus placing downward pressure on the AUD/USD.

We expect a range today of 1.0120 – 1.0220

New Zealand Dollar
The New Zealand dollar continued its steady move higher yesterday as sentiment for the Asian region remains relatively positive. Given a boost by its cross-Tasman counterpart after the RBA minutes, the Kiwi drifted higher in local hours before rallying towards 0.7990 offshore. With no new concerns for Europe emerging over the past 24hrs the risk-sensitive Kiwi has been given a reprieve and this morning holds recent gains at 0.7980. Today brings the domestic economy back into focus with the publication of the current account balance for the first quarter of 2012, and further direction will be taken tonight from the reaction of the US Dollar to its central banks decision on monetary policy. Post RBA minutes, the Aussie dollar strength pushed the NZD/AUD down to near 0.7815 although the Kiwi fought back and they trade this morning circa 0.7830.

We expect a range today of 0.7930 – 0.8020

Great British Pound
Sterling dropped 0.4% against the US Dollar yesterday as UK inflation slows to its lowest level since November 2009, and dropping below the expected 3%. Less price pressure only adds to arguments for further quantitative easing from the Bank of England, where they purchase assets from institutions to increase liquidity and free up the credit markets. This practice does place downward pressure on the Pound, hence the drop to lows of 1.5620, although increasing optimism over Greece and Spain has helped Cable to recover to trade above $1.5700 this morning. Currently at 1.5725, the cross-rates have not fared as well; the Aussie and Kiwi dollars have outperformed in light of UK CPI figures and cash in at 1.5425 and 1.9710 respectively. Sterling will be taking direction today from unemployment figures due as well as the minutes of the previous Monetary Policy Committee meeting.

We expect a range today of 1.5380 – 1.5520

Majors
The Euro has opened higher this morning after comments emerging from the G20 fuelled what was an earlier cautious move back towards 1.2600. Set back temporarily by a disappointing reading for both German and European economic sentiment, the single currency marched higher to peak above 1.2700 to a high near 1.2730. Factors behind the euro rally come down to more promises from European officials as well as Greenback weakness as markets await possible monetary stimulus to be announced at tonight’s FOMC meeting. This time around markets have been told that a ‘politically accepted path’ will be the aim when looking at a potential renegotiation of Greece’s bailout conditions. With a coalition set to be decided shortly and an easing stance on imposed austerity measures being pledged, investors are more at ease and hence the Euro has settled to change hands at 1.2685 this morning. The Japanese Yen has made little ground either way against the Greenback as market participants await the outcome of the aforementioned FOMC meeting as well as the minutes of the BOJ meeting and the country’s trade balance. The USD/JPY trades at this morning’s open around the 79.00 handle.

Data releases:

AUD: CB Leading Index m/m; MI Leading Index m/m; Housing Starts q/q

NZD: Current Account

JPY: Monetary Policy Meeting Minutes; Trade Balance

GBP: MPC Meeting Minutes; Claimant Count Change

EUR: German PPI m/m

USD: FOMC Statement; Federal Funds Rate; FOMC Economic Projections