Australian Dollar:
The Australian dollar slipped below 0.80 U.S cents in overnight trade on Monday as the world’s base currency found support in rising treasury yields. The domestic docket offered little to spark investor action and Traders were content to sit on the sidelines reluctant to force any significant moves ahead of what promises to be a busy week. Attentions today turn to the Reserve Bank’s Monetary Policy Meeting Minutes with markets scrutinising the boards thought processes and seeking guidance on forward monetary policy. Should the minutes support the rate statement that proceeded the May rate cut then we would expect the AUD to hold onto the recent advance, however any suggestion that looser monetary policy remains on the table will likely see a deeper downward correction toward 0.78.
We expect a range today of 0.7820 – 0.8080
New Zealand Dollar:
The New Zealand Dollar sell of continued through Monday as news of a capital gains tax on investment and residential properties added to calls/expectations the RBNZ is preparing to cut interest rates. The announcement sparked a downward run and was seen as fiscal policy measure designed to deflate the housing market in a loose monetary policy environment. Plunging over 1% against its US counterpart the Kiwi slipped below 0.74 touching intraday lows of 0.7370. Attentions now turn to quarterly inflation expectations and the global dairy trade index for direction leading into a crowded US docket.
We expect a range today of 0.7290 – 0.7475
Great British Pound:
The Great British Pound edged lower through trade on Monday as a broad based U.S dollar advance forced Cable back below 1.57. Sterling followed its European counterpart lower amidst concerns Greece will fail to meet its next tranche of debt obligations resting near technical supports at 1.5650. As the euphoria that followed the Conservative election win last week begins to fade attentions will turn back to market and economic fundamentals with a yearly inflation report set to govern direction through Tuesday.
We expect a range today of 1.9350 – 1.9750 and 2.1025 – 2.1280
Majors:
A string of softer than anticipated macroeconomic fundamentals has forced investors to trim long dollar bets driving USD net long positions to their lowest level in nine months. Despite weaker than expected housing data the U.S dollar enjoyed broad based gains throughout trade on Monday recouping some of the losses suffered during last week’s sell off. Investors looked to US treasury bonds as prices fell and yields rose in response to a run on Greek debt. Concern and attention has shifted back to the embattled Greek economy with two year government bonds climbing 24% as traders expect Greece will fail to meet its IMF debt obligations next month. Greece has entered a financial twilight zone borrowing funds to repay previous loans and seems no closer finding a path out of the quagmire. The Euro fell back below 1.14 touching intraday lows of 1.1298 as the focus shifts to European manufacturing numbers Thursday and US inflation numbers Friday for further direction and a possible downward push toward 1.1250.
Data releases:
AUD: CB Leading Index and Monetary Policy Meeting Minutes
NZD: PPI Input, PPI Output, Quarterly Inflation Expectations and GDT Price Index
JPY: No Data
GBP: CPI y/y, PPI Input m/m, RPI y/y, Core CPI y/y, HPI y/y and PPI output m/m
EUR: German and Eurozone ZEW Economic Sentiment, Final CPI y/y and Trade Balance
USD: Building Permits and Housing Starts