Australian Dollar:

After initially starting the day up above the 0.9750 mark against its US counterpart the Australian dollar has fallen for much of the past 24 hours with The Dollar Index advancing from an almost one-month low amid renewed speculation US growth will accelerate, increasing demand for the Greenback. Continuing its recent trend where the plight of the Aussie dollar has become so greatly dictated by the flows into and out of the Greenback, as was widely expected yesterday the Reserve Bank of Australia maintained the official cash rate at 2.75 percent. Whilst leaving the door open for future cuts Policy marker did make mention of the fact previous reductions had shown clear signs of boosting economic activity and they were keen to see if there was more, before moving again. In a busy week for forex markets GDP figures expected to be released this morning followed by trade balance figures tomorrow will be critical in determining the Aussie dollars short-term direction leading into the all important non-farm payrolls release in the US on Friday evening. Meanwhile this morning the Aussie dollar is back to where is started the week as it currently buys 96.48 US Cents   

• We expect a range today of 0.9610 – 0.9680

New Zealand Dollar

The New Zealand dollar has been unable to consolidate its impressive gains from overnight Monday having tumbled against the US dollar for much of yesterday’s session. With the US Dollar moving lower initially on Monday before kick-starting an impressive rally, highlighting just how tapped in and reliant investors have become on US data flows the Kiwi’s direction is likely to be dictated more so by rumours of the US Federal scaling back stimulus than it is local happenings. Falling from opening levels of 0.8085 the New Zealand dollar opens notably weaker this morning as it buys 80.18 US Cents.  

• We expect a range today of 0.7990 – 0.8050

Great British Pound:

In a positive sign which suggests the UK economy may be moving towards a tentative recovery, construction unexpectedly returned to growth figures overnight revealed. Given the Index of building activity rose to 50.8 from 49.4 in April, this is the first sign of growth within the sector since October last year. Far from sparking a rapid appreciation the Great British Pound was weighed down by an equally as strong Greenback which sees the Sterling open at a very similar level this morning at 1.5309. Meanwhile on the cross rate the Sterling is stronger against both the Aussie (1.5862) and the Kiwi (1.9087).  

• We expect a range today of 1.5830 – 1.5890

Majors:

The US dollar sell-off which was triggered by the poor ISM manufacturing reading overnight on Monday reversed itself yesterday with the Dollar Index bouncing from one-month lows.  Following the release of figures overnight which showed the US trade deficit widened in April from than a more three year low, the growth in imports of 2.4 percent was seen as a positive given the jump in American consumer demand for foreign-made goods.  With investors once again driving speculation that the Federal Reserve may reduce stimulus as soon as September, the change in rational from earlier in the week proves just how volatile the rise of the Greenback could be. Whilst on the US dollar growth story its strength has hurt the USD/JPY pair which opens weaker this morning at 99.97. Meanwhile in Europe and the shared unit continued to enjoy its time up above the 1.3000 mark trading to overnight highs of 1.3100. Opening this morning at a rate of 1.3077 a string of PMI readings expected to be released this evening amid the backdrop of a stronger US dollar may see downside support tested over the coming 24 hours.  

Data releases

• AUD:GDP q/q
• NZD:No data today
• JPY:No data today
• GBP:Services PMI
• EUR:Spanish Services PMI, Italian Services PMI, Final Services PMI, Retail Sales m/m 
• USD: ADP Non-farm employment change, Ism non-manufacturing PMI, Factory Order m/m, Beige Book