Australian Dollar:

While the moves close to 1.06 last week now appear to have been overdone, the correction to 1.03 yesterday also appears to have been a bit aggressive, as we now find ourselves trading around 1.0385. Most other indices are also up, with gold recovering a tad and US equities having solid performances on the back of better than expected corporate earnings. Locally yesterday we had the RBA minutes which continued recent themes of ‘inflation providing scope for easing’, while ‘previous cuts are showing results in the non-mining segments of the economy’. This initially saw a slight dip in the Aussie back to 1.0320, but this was recovered by mid-afternoon. On other crosses, the Aussie has given up ground against a fast gaining Euro, currently back below 0.79, while AUD/JPY spent some time below 100 yesterday but is now back up at 101.50. There is very little out today so the Aussie looks likely to follow Asian equities higher, but this may fade towards the end of the day.

• We expect a range today of 1.0345– 1.0425 

New Zealand Dollar:

We find the New Zealand Dollar just below a strong 0.85 resistance level this morning after it recovered off yesterday’s lows, just below 0.84. After a correction on Monday night, that was in part set off by the poor Chinese GDP figures, the markets recovered strongly last night after US figures showed some improvement in the housing sector while inflation was kept low. There was little in the way of data locally yesterday, but gains in dairy prices overnight did provide some further support for the Kiwi, as prices move to record highs - although the pace of growth has slowed. Looking ahead we have local inflation due out shortly, which is the highlight for the local calendar this week, and will likely provide direction on whether we break through the 0.85 level or look for support around 0.8450.

• We expect a range today of 0.8450– 0.8540 

Great British Pound:

After underperforming against most of its counterparts during European trade, the pound came to life during the US session breaking through 1.5330 on the way to 1.5370. While other currencies were enjoying a recovery against the greenback and Yen, the pound was held fairly flat after local inflation came in unchanged. The monthly and yearly figures came in at 0.3% and 2.8% respectively while the core CPI number was slightly better at 2.4%. Heading into US trade, the pound was holding below 1.5330, but with the Dow jumping 158 points and gold closing up 2%, the pound broke through this level and headed higher against the greenback. Meanwhile with the Euro at near two month highs, the EUR/GBP cross has moved back above 0.8570. On the south pacific crosses, the pound remains fairly flat against both the Aussie (1.4795) and Kiwi.

• We expect a range today of 1.4760– 1.4825

Majors:

Yesterday we opened to find risk aversion in full swing and USD and JPY both gaining; this appears to have been a correction waiting to happen that was brought on by a number of factors. After such a solid run down in the Yen and up in risk-correlated assets last week, the market had placed itself in a position that any kind of negativity would send everything tumbling back down. This is exactly what happened after we saw some slightly worse than expected Chinese data and a sharp fall in gold prices. It appears now that this correction was also overdone and we now find ourselves trading around the midpoint for most assets between our peaks last week and the bottom yesterday morning. That is except for the Euro, which saw solid gains last night; pushing past last week’s high, despite some poor data releases, indicating that the lows seen yesterday, just below 1.3030, were significant enough to drive prices higher. On the data front, ZEW surveys in Europe came in lower than expected, Eurozone CPI was slightly higher while the IMF lowered global growth forecasts. In some positive news for the market; US housing starts gained by 7% in March while US CPI was kept lower, indicating that the while the Fed’s stimulus is working, the risk of inflation is still limited. The Euro opens this morning at near 2 months highs at 1.3185, while USD/JPY has moved back towards the 98 level.

Data releases:

• AUD:Westpac leading index
• NZD:Consumer price index
• JPY: Consumer confidence
• GBP:Bank of England minutes, Jobless claims, Unemployment rate
• EUR: Construction output, New car registrations
• USD:Beige book