Australian Dollar: Speculation of a further RBA rate cut lessened yesterday as the central bank’s minutes from the previous monetary policy meeting acknowledged only ‘moderate easing’ was required in current domestic and global conditions. The Aussie was given a lift in local trade as it was mentioned there was even a case to leave rates on hold at the Melbourne Cup day meeting.

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Pushing to session highs near 1.0220 the Aussie was unable to maintain these levels as risk aversion once again grappled the markets. Record high bond yield, poor investor sentiment and economic growth are still the underlying theme out of Europe and in such an environment the high –yielding Australian Dollar will struggle to find much upside momentum. Opening this morning capped by resistance at 1.0200, the Aussie trades at 1.0180 ahead of wages data and the Melbourne Institute’s Leading Index which is designed to predict the direction of the economy.

We expect a range today of 1.0100 – 1.0210

New Zealand Dollar: The New Zealand Dollar continues to be weighed down by poor investor sentiment, largely contributed to the never-ending concerns out of Europe concerning its debt crisis. Early in local trade the New Zealand Dollar touched highs at 0.7800 helped out by a 2.6% rise in dairy prices, the country’s largest export industry. These levels were only seen briefly as flows away from risky assets caused the Kiwi to trend lower throughout the day to lows of 0.7670, a minor recovery giving an opening level this morning of 0.7710. The Kiwi/Aussie cross moved lower in Asian trading hours as RBA minutes helped to brighten the outlook for interest rates across the Tasman and the pair open today at 1.3200 (0.7576).

We expect a range today of 0.7660 – 0.7750

Great British Pound: The Sterling’s status as a temporary safe-haven emerged once again overnight as it rallied against the troubled Euro and Gilt yields dropped to record lows, showing the perceived safety of sterling-denominated assets. The British Pound rallied to 1.1740 against the shared dollar however Greenback strength meant Cable still lost ground to 1.5810. A fall in CPI to 5% surprised few and had very little impact in the markets as Mervyn King confirmed in the Bank of England’s inflation letter that they expect inflation levels to retreat as global growth continues to slow. In a risk adverse environment the Pound rallied against the high-yielding Aussie to a high of 1.5675 although it opens lower this morning at 1.5530. A similar pattern against the Kiwi saw highs of 2.0665 but opening levels this morning of 2.0495.

We expect a range today of 1.5480 – 1.5610

Majors: The Euro very briefly dipped below 1.3500 for only the second time in over a month as concerns for the European continent persist. Italian bond yields once again reached the perilous 7% level, a level where Greece, Ireland and Portugal deemed it too expensive to raise funds domestically; concerns also emerged new technocrat PM Mario Monti will struggle to raise the political support required to implement strategies to stop the spread of the debt crisis to Italy.

Adding fuel to the fire was the German ZEW survey which showed investor confidence levels to be at a 3 year low and flash GDP readings for the third quarter reporting an unimpressive 0.2% level of growth. The single currency fell to 1.3495 after trading at highs earlier in the day near 1.3630 however the strengthening of the Greenback did not only come from safe haven flows. In an environment where global growth and recession are in the forefront of investors’ minds a better than expected US Retail sales report gave the world’s largest economy a boost overnight. What many are reporting to be a strong start to the quarter has strengthened the outlook of the US economic recovery. The EUR/USD opens this morning under pressure around 1.3540 and the USD/JPY remains around 77.05 despite the ongoing threat of a BOJ intervention.

Data releases:

AUD: MI Leading Index m/m; Wage Price Index q/q

NZD: No data due for release

JPY: Monetary Policy Statement; Overnight Call Rate

GBP: Claimant Count Change; BOE Inflation Report

EUR: CPI y/y; Core CPI y/y

USD: Core CPI m/m; TIC Long-Term Purchases; Industrial Production m/m