New Zealand Dollar:
The Kiwi has staged a solid recovery over the past 24 hours, rising close to one cent against its US counterpart to open at 0.8175 this morning. The rally began yesterday morning with the Performance of services index coming in better than expected at 56.1, improving from last month’s figure of 55.6. Following this we also had comments from Finance Minister Bill English, who warned that those getting into the rising Auckland housing market must be prepared for the possibility of rising interest rates. The market has taken this as a continuation of the recent theme that even if the NZD becomes too strong; the RBNZ will be unwilling to cut interest rates and may even be forced to raise them to avoid a housing bubble developing in Auckland. Also helping the rally in the Kiwi was some consolidation movements in the Greenback against most of its counterparts, but this may lead to some strong resistance against any further gains should local RBNZ inflation expectations come out better than expected later today. We expect a range today of 0.8140– 0.8220.

Great British Pound:
The pound managed to recapture some lost ground against the Greenback overnight after the US currency appeared to enter a bit of a consolidation mode following the stellar performance it put on last week. With little local data last night and much of Europe closed for the a public holiday, the pound found further support towards the end of the US session after Fed member Evans said that the Fed will likely maintain current bond purchases for the time being. The cable managed to move close to 1.5275 but has since settled back to 1.5260 for this morning’s open. Meanwhile pound is flat against the Aussie (1.5585) but weaker against the Kiwi (1.8665) which was one of the better performing currencies yesterday. We expect a range today of 1.5535 – 1.5585.

Majors:
With much of Europe on a bank holiday yesterday and very little in the way of data, it was a mostly quiet session yesterday. The Greenback lost ground against most of its counterparties overnight, initially due some consolidative movements after perhaps being slightly over bought in the back end of last week. This consolidation was then extended by comments made by Chicago Fed member Charles Evans in one of many speeches to be made this week, in which he stated that while key indicators are showing positive signs for the economy, the current levels of stimulus remain appropriate for the time being. This is somewhat at odds to what another Fed member said towards the end of last week but is generally typical of the mixed messages we generally receive from the different Fed members. This will make the FOMC minutes and the speech to be made by the head of the Federal Reserve, Ben Bernanke, on Wednesday night all the more important for further market direction. Yesterday also saw a bit of a rally in the Japanese Yen, although any significant gains were somewhat limited, as Japanese Economy Minister Akira Amari said that levels around 100 for USD/JPY is appropriate for the economy and if the Yen weakens much further it may begin to have a detrimental effect on the economy via rising bond yields. After trading above 103 on Friday night we now find USD/JPY back at 102.25 this morning, while EUR/USD has recovered back towards 1.29 and we sit just below that level this morning. Today is again shaping up as a quiet session with only minor data out of Europe and more Fed officials making speeches.

Data releases:
AUD: Conference board leading index, RBA policy meeting minutes
NZD: RBNZ 2-year inflation expectation, Credit card spending
JPY: All industry activity index, Supermarket sales
GBP: Producer price index, Consumer price index, Retail price index
EUR: German producer prices
USD: Fed’s Bullard and Dudley speak

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• Australia FX
• Canadian Forex
• NZ Forex
• UK Forex
• US Forex

The Dollar’s broader rally was relatively unaffected by poorer US data. Eurozone GDP numbers provided some bearish Euro flows, while the UK’s Inflation Report was upbeat, but moderately limited in impact. The week ahead looks set to be immensely busy. Significant data releases are made from all major economies. Headline releases will include UK CPI, MPC Minutes, second Estimate GDP and retail sales. From the Eurozone, we have manufacturing and service PMIs, while Draghi delivers a speech entitled ‘’The Future of Europe in the Global Economy” in London on Thursday evening. Meanwhile, from the US we eagerly anticipate the FOMC minutes on Wednesday, jobs, new homes and durable goods orders.

Today’s rather empty docket will provide a lull before the storm. A lot of European nations are on public holiday as they observe Whit Monday. The US session is very light with only a speech delivered by FED Evans in Chicago to digest. Bear in mind recent comments from FED Members have had significant impact on the market and will do so as investors anticipate a scaling back of FED bond purchases highlighted by the FOMC minutes on Wednesday. Positioning ahead of a busy week is likely today so take little for granted. The Dollar may stay firm, but is entering oversold territory. Cable opens just above 1.520 having tested 1.5176 earlier. We expect a range today in the GBP/USD rate of 1.510 to 1.530.

Euro
The Euro was a relatively good performer last week, particularly against the Aussie and Kiwi Dollars. While EURUSD struggled towards the weekend, the pair was somewhat resolute when you consider fluctuations in other major crosses. GBPEUR ended rather flat and within the 1.18-1.19 range.

The week ahead will be another jam-packed one. Talk of ECB negative deposit rates will likely keep the Euro under pressure for now, but there are plenty of fundamental catalysts later in the week, which will keep the market very busy and highly volatile. Today will be quiet as Germany, France and other EU member’s observe a public holiday; we will likely see a relatively flat market bar some positioning ahead of the week to come.

Sterling will receive its first ‘test’ early tomorrow as CPI numbers hit the market. Inflation is expected to post at 2.6% annualized in April against 2.8% price growth in March. This may limit the Sterling’s appeal as the market eagerly awaits the BoE minutes on Wednesday. Having said that, last week’s inflation report already projected inflation to fall. The BoE minutes will garner a great deal of attention on Wednesday. No change in actual policy is expected, but a hawkish sentiment is likely in the accompanying statement. MPC Member Weale struck a rather upbeat tone last Friday and you would expect some confirmation of the BoE moving away from its easing cycle. Second estimate UK GDP is released on Thursday. Eurozone data comes later in the week and is headlined by manufacturing and service PMI’s.

The Euro is expected to remain softer against the Dollar though we could see some move back towards 1.30 during the middle of the week, but a more uncertain close. GBPEUR is much harder to call. While we remain within the 1.18-1.19 range it could very well go either way as both Sterling and Euro are subject to significant event risk. The path of least resistance is to the downside, but a particularly upbeat BoE report and decent inflation release could see bullish-Sterling momentum forcing the pair higher before a number of key EZ fundamental catalysts are digested into the weekend. The pair trade above 1.180 this morning after Rightmove house price data showed UK properties rose 2.1% in the last month. EURUSD is slightly firmer at 1.2865. We expect a range today in the GBP/EUR rate of 1.1740 to 1.190.

Aussie and Kiwi Dollars
The Aussie and Kiwi were again amongst the weakest performers last week. AUDUSD and NZDUSD were both down heavily as commodity currencies were sold sharply in favour of flows back into other major markets – European and US Stock markets performed exceptionally strongly as yields were sort out of the pure carry trade market. The trend is likely to continue as the US Dollar decouples from its risk on/risk off attraction and the market continues to positioning for a nearside withdrawal of extraordinary FED intervention. AUDUSD looks particularly sensitive as the US Dollar looks set to benefit further from this shift in dynamics, but would also see support if market confidence does dwindle again. The Kiwi could prove a little more robust, but is likely to be dragged along by its larger cousin and expectations that China is slowing.

Both the Aussie and Kiwi Dollars are expected to remain volatile this week. However, we could see limited early gains in the Antipodeans favour as crosses moved heavily into oversold territory on Friday. There remains a good change investors will test key psychological levels should these flows continue. With this in mind, GBPAUD could make a play towards 1.60, AUDUSD to 0.95 and EURAUD to 1.35. GBPNZD looks set to test 1.90 in the near term. Bear in mind that markets remain fickle and susceptible to sudden shifts in both flow and sentiment. Therefore, until we get confirmation on a technical basis, coupled with key fundamental catalysts, there is always the chance that recent moves could reverse.

Key data is expected from both nations this week, while significant releases from all other major nations will ensure the market is kept very busy. Kiwi inflation expectations hit the market overnight, while Australia’s are released on Thursday. The headline release will be the RBA minutes tonight. Bear in mind the rate was cut to 2.75% at the last meeting, which makes this release crucial in determining the Aussie’s next step. We expect a range today in the GBP/AUD rate of 1.540 to 1.5650. We expect a range today in the GBP/NZD rate of 1.850 to 1.880

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New Zealand Dollar:
The Kiwi has continued to move lower against its US counterpart, reaching a 6 month low on Friday night, as US consumer sentiment rose more than expected, furthering the case for the US central bank to begin winding down their current easing cycle. Despite strengthening on Thursday after positive signs were seen from the local budget, the continued strength of the Greenback has seen us approach levels not seen since November last year. The focus this week will be local inflation expectations tomorrow before the FOMC minutes and a speech from Bernanke on Wednesday night may set us up to target the key psychological 0.80 level against our US counterpart. This morning we open marginally higher from Friday’s lows at 0.8090, while falls against the Aussie has seen that cross rate move back above 1.2040.
We expect a range today of 0.8045– 0.8120.

Great British Pound:
Despite starting last week just below 1.54 and then seeing some positive local data releases, the pound spent much of the week falling against a fast moving Greenback. Some better than expected employment numbers and a revision in growth figures last Wednesday from the Bank of England weren’t enough to prevent the pound falling to six week lows on Friday against the US currency as expectations of a reduction in the monthly bond purchases by the Fed were bolstered by some better than expected US data. The cable finished the week at 1.5180, which is close to where we find it this morning, while this week sees Bank of England minutes and inflation figures locally but we may continue to find most of our direction dictated by US happenings. Meanwhile pound is flat against both the Aussie (1.5585) and the Kiwi (1.8780). We expect a range today of 1.5525 – 1.5630.

Majors:
The Greenback continued its recent gains on Friday, following some better than expected data out of the US that further suggests the potential of an early end to the Fed’s current easing policies. University of Michigan consumer sentiment index increased to 83.7 for May, which was much higher than last month’s figures of 76.4 and well above market expectations of 77.9. These figures, which are at a five year high, were also combined with strong leading indicator numbers which came in at 0.6% and continues to paint the picture of an improving US economy. Despite some poorer figures during the middle of last week, the Greenback has been moving from strength to strength, particularly against the commodity currencies, with recent comments from the San Francisco Fed member that the US central bank may wind back some of their current bond purchases as early as the end of this summer. For most investors, this may seem a little ambitious but it would have many considering the potential for a change earlier than they may have originally forecast. This sets up the FOMC minutes and a speech from Bernanke on Wednesday as key events this week, and should set the tone for further USD direction. USD/JPY continued to move higher on Friday, breaking above 103 for the first time since October 2008 but it has since pulled back off those highs to where we open at 102.25 this morning. Meanwhile the Euro was also weakened on Friday by trade balance figures out of Spain which showed a sharp falls in imports, while political unrest in Italy also hurt the shared currency. We fine EUR/USD this morning at 1.2845.

Data releases:
AUD: No data today
NZD: Performance services index
JPY: Cabinet office monthly economic report, Tokyo condominium sales, Leading index, Machine tool orders
GBP: Rightmove house prices
EUR: No data today
USD: Chicago Fed Nat activity index, Fed’s Evans speaks

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• Australia FX
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• NZ Forex
• UK Forex
• US Forex

Nearly all key US data disappointed yesterday. Probably the most relevant from a FED-action perspective were the unemployment claims and CPI figures. Data showed unemployment climbed by 360k last week, against expectations of 332k. Meanwhile, CPI fell from 1.5% YoY to 1.1%. Yesterday’s poor manufacturing and industrial production releases were affirmed by a shockingly bad Philly Fed release of -5.2, down from 1.3 and significantly below expectations. Only building permits posted well, but were not enough to counteract the other poor data.

Most dollar crosses managed to stage limited rebounds as markets digested the news. Moves were limited though after comments made by FED member, Williams, who noted that the FED could reduce its purchases ‘as early as this summer’. He noted in particular an improving labour market. He projects US growth to be 2.5% in 2013 and 3.25% in 2014 (note Euro GDP data yesterday!), while expecting inflation to climb though stay below the FED’s 2% target.

Cable rallied above 1.530 having touched a low of 1.5198 earlier in the day, but has slipped back to 1.5235 this morning. AUDUSD’s bearish rally continues and the pair has plummeted this morning. Perhaps we are experiencing the end of the beginning as the cycle of cheap money and extraordinary easing policies come to an end. Flat European CPI was initially enough to see the Euro bid up to 1.2930, but the broader Dollar rally continued during the Asian session and the pair trade back at 1.2865 this morning.

Today should be quieter. Having said that, Dollar crosses are experiencing major technical moves on higher momentum. No key releases are expected from Europe or the UK. MPC Member Weale Speaks at the British American Business Council 2013 Annual Transatlantic Conference in Birmingham this morning and could provide an early indication of the BoE minutes due next week. Otherwise, the headline figure will be preliminary consumer sentiment numbers from the US. An improved print is expected. FED Chairman, Ben Bernanke, speaks in Massachusetts tomorrow. We expect a range today in the GBP/USD rate of 1.5050 to 1.5350.

Euro
Expectations of another ECB rate cut were bolstered yesterday by data showing that inflationary risks are not evident in the Eurozone. The region’s CPI release was confirmed at 1.2% showing no change from last month and bang-on forecast. The Eurozone’s trade surplus widened to €18.7bln in March, while February’s figure was revised higher to €12.7bln.

A mixed picture yesterday, but the Euro weakened as data confirms the region is falling behind its peers and the market positions for expected ECB intervention. EURUSD staged a rally over 1.290, but soon capitulated. The rally between Sterling/Euro was more pronounced as the pair moved back into range and tested a high of 1.1861 this morning. Sterling bulls will be hoping support is strong enough to close this week above 1.180.

No major data is expected from the Eurozone today. We could see minor volatility this afternoon as trader’s position ahead of the weekend and data next week. An action-packed week looks set to end on a significantly new note, particularly when assessing US Dollar crosses. Monday’s report commented on a staid and complacent market; things have certainly been shaken up this week. We expect a range today in the GBP/EUR rate of 1.1750 to 1.190.

Aussie and Kiwi Dollars:
It has taken 5 months, but the losses incurred during the first Quarter of this year between GBPAUD and been retraced. The pair has smashed through resistance to test 1.5650 this morning, testing the highest level since January 1^st and a major technical level, which if broken would set the pair up for a rally to 1.60. We are experiencing a clear upward trend as the market recovers from record lows and while we would want to see a few sessions remain above this level – as confirmation bullish sentiment is driving this – the moves were solid. 1.570 represents the next upside target. Aussie slid against most majors yesterday, with the most significant losses being made against the US Dollar.

The broader decline in the Antipodeans was showing between Sterling/Kiwi as well. The pair tests the highest level since February 11 this morning and has peaked thus far at 1.8841. Kiwi PPI numbers were released above expectations at 0.8%, but markets were unabated in their drive higher.

We appear to be experiencing a major shift in market dynamics. Granted US data is not great, the UK is sluggish, and Europe is Europe, but perhaps we are turning a corner as expectations improve. As commodity prices fall, China slows, and expectations of less robust economic performance from the Aussie/Kiwi dollars are expected in comparison to their peers, we could finally be waving goodbye to long-term lows. Markets remain fickle and prone to sudden shifts and it would be premature to confirm with certainty at this stage. We are close, but in the first instance we need to see strong pushes above 1.90 and 1.60 and then support to hold. The Kiwi would be more the likely Dollar to refute this bold statement, time will tell. We expect a range today in the GBP/AUD rate of 1.550 to 1.570. We expect a range today in the GBP/NZD rate of 1.8650 to 1.90.

Data Releases
AUD: None
EUR: None
GBP: MPC Member Weale Speaks
NZD: None
USD: Prelim UoM Consumer Sentiment, Prelim UoM Inflation Expectations, CB Leading Index m/m, Fed Chairman Bernanke Speaks

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New Zealand Dollar:
The New Zealand dollar found some support initially yesterday following the announcement that the government will meet its target to return the budget to surplus in 2015. Whilst highlighting the overheated property market remains a priority, overall the budget is in better shape than first thought. Despite reaching a mid morning high of 0.8270 against its US counterpart it was all downhill for the New Zealand dollar from this point which was sold aggressively across the board following further suggestions the US Federal Reserve could begin reducing the pace of bond purchases as early as the north hemisphere summer. Tumbling to an eventual low of 0.8138 so much of the Kiwi’s direction is set to be dictated by both US data flows and the accompanying talk of existing stimulus measures throughout the world’s. Largest economy. The New Zealand dollar currently buys 81.60 US Cents. We expect a range today of 0.8130 – 0.8190.

Great British Pound:
Following a night of poor economic releases from the world’s largest economy the UK government has been successful in selling 3.83 billion worth of 30-year securities at an average yield of 3.121 percent. With the return on government bonds increasing so to has demand for the Sterling which opens stronger by 0.3 percent against the Greenback this morning at a rate of 1.5266. In the absence of any meaningful releases locally this evening US consumer sentiment remains the pick of an otherwise quiet economic calender. Meanwhile on the cross rates this morning the Great British Pound has benefitted from a significantly lower Aussie (1.5551) and Kiwi (1.8699) hence opening stronger in comparison. We expect a range today of 1.5520 – 1.5580.

Majors:
Snapping a five-day rally, the longest winning streak since February, the US dollar fell overnight after a handful of disappointing economic announcements hampered demand for the world’s reserve currency. With Building permits, weekly unemployment claims, housing starts, Core CPI and the Philly Fed Manufacturing Index all coming in below what was forecast you can’t help but think those who suggest the US economy is currently strong enough to stand on its own two feet may be getting ahead of themselves. Furthering this notion US Federal Reserve Chairman Ben Bernanke has been clear in stating stimulus measures will not be wound back until unemployment reaches 6.5 percent or inflation 2.5 percent, two targets which remain a long way off. In what has been a miserable night of economic releases, movements into or out of the Greenback have been relatively muted as the USD/JPY opens unchanged this morning at 102.22. Meanwhile in other happenings the 17-nation currency has fallen to a six-week on expectations the ECB will ease monetary Policy as the shared unit opens marginally weaker at 1.2879.

Data releases
AUD: No data today
NZD:  PPI Input q/q, PPI Output q.q
JPY:  Core Machinery Orders m/m,
GBP: MPC Member Weale Speaks
EUR: No data today
USD: Prelim UoM Consumer Sentiment, Core CPI m/m, CB Leading Index m/m

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• Australia FX
• Canadian Forex
• NZ Forex
• UK Forex
• US Forex

UK data on the other hand showed a mixed labour market yesterday morning. Claimant counts – the number of people claiming unemployment related benefits - declined by 7.3K in April, while March’s already strong figure was improved to -9.9k. However, actual unemployment rose by 15k to 2.52mln. The unemployment rate dropped to 7.8% from 7.9%.

US data took a turn for the worse as all major prints missed expectations. May’s PPI dropped -0.7% on expectations of a flat print at -0.6%. This was the lowest MoM PPI since July 2009 and may dampen expectations of an imminent FED scale-back of open ended purchases, particularly as Empire Manufacturing and industrial production numbers came in under expectations. The Empire release was most disappointing as expectations of 3.6 were hugely wrong and the official number came in at -1.4 – the first contraction reading since January. Dollar lost a little steam during the early US session, but the brakes were only tapped and momentum kicked in swiftly again. There is no sign of Dollar topping just yet; Cable trades at 1.520, EURUSD at 1.2860 and AUDUSD at 0.9830. Decent Japanese GDP saw USDJPY slip marginally to 102.40.

Only a 30-year bond auction is expected from the UK today. Attention is again on the Eurozone this morning, while the US releases key job, inflation, building permits and Philly Fed Manufacturing data. All are expected to have improved, but expect the unexpected after yesterday’s releases. We expect a range today in the GBP/USD rate of 1.510 to 1.5350.

Euro
EURUSD dropped to a six-week low yesterday and for the fifth session in a row as reports showed the region’s economy shrank significantly last month. The region-wide reading looked set to be poor after the individual German, France and Italian were appalling. Germany managed to post a positive figure, but at 0.1% it doesn’t evoke much confidence. France shrank by -0.2% while Italy declined by -0.5%. Spain and the Netherlands also shrank. The regional economy shrank by -0.2% to confirm the longest recession in the currencies history. The bottom line is that the region is falling massively behind its peers and struggling under the weight of austerity, deleveraging and readjustment.

Market reaction was clearly anti-Euro though it surprising moves were not more pronounced. EURUSD slid to circa 1.2850; Sterling managed to test 1.1850 and holds just over 1.180 this morning.

The second round of major EU data hits markets this morning. European CPI (inflation) is expected to print at 1.2%; well below target and vulnerable to disappointment. Trade balance figures are released at the same time. Euro weakness is expected, particularly against the US Dollar. Focus shifts quickly to the US and a busy afternoon of key economic releases from across the pond. We expect a range today in the GBP/EUR rate of 1.1750 to 1.190.

Aussie and Kiwi Dollars
The Aussie Dollar struggled yesterday. Markets digested the annual budget, but it was developments in the bond markets that caused a lot of the moves. The yield differential between Aussie and US 10-year debt has dropped to the lowest level since June 2012. While markets price expectations that the FED is to begin scaling back its bond purchases, recent Aussie data coupled with the Annual Budget has increased expectations of another rate cut from Australia sometime in the not-too-distant-future. The RBA will likely welcome the depreciation as the domestic currency has held at historic highs for some time. There is a good chance AUDUSD will rebound a little based primarily on technical factors. US Dollar support remained high during the Asian session.

Japanese GDP printed above forecasts at 0.9%, which is the best print in 12 months. Both the Kiwi and Aussie Dollars depreciated as falling commodity prices continue to weigh on the antipodeans. New Zealand’s government projects the first budget surplus in 7 years will come in 2015. Their Annual Budget stressed strong tax revenues, while economic growth will be boosted by the rebuilding of Christchurch. The economy will grow 2.3% in 2013/14 and 2.8% in 2014/15, which means growth expectations for this year have been lowered from 3%. From a currency perspective, the government forecasts the Kiwi will remain elevated against a basket of currencies until 2017.

That seems a little too long for some as GBPNZD weakened 0.6% this morning to test 1.860. GBPAUD trades just below 1.550 at present. Both Sterling/Dollar crosses are at key resistance levels and further tests and a break look likely. Only New Zealand PPI data is expected tonight, improvements are forecast, but are likely to be minimal in impact. We expect a range today in the GBP/AUD rate of 1.540 to 1.560. We expect a range today in the GBP/NZD rate of 1.840 to 1.8650.

Data Releases
AUD: None
EUR: CPI y/y, Core CPI y/y, Trade Balance
GBP: 30-y Bond Auction
NZD: PPI Input q/q, PPI Output q/q
USD: Building Permits, Core CPI m/m, Unemployment Claims, CPI m/m, Housing Starts, Philly Fed Manufacturing Index, Natural Gas Storage, FOMC Member Raskin Speaks

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• Australia FX
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• NZ Forex
• UK Forex
• US Forex

New Zealand Dollar:
The NZD/USD was one of the only major pairs to have rallied overnight as investors took the opportunity to buy the Kiwi amid the backdrop of a suppressed Greenback. Having spent large parts of the week below the 82 US Cents level a handful of disappointing data releases from the world’s largest economy has seen the crème come off the US dollar and hence a stronger Kiwi. Rebounding well from earlier lows of 0.8173 the New Zealand dollar is notably stronger this morning as it buys 82.24 US Cents. Coming into focus today investors will be eyeing the release of the annual Federal Budget where it’s expected a longer-term target for a surplus will be established for 2015. We expect a range today of 0.8190 – 0.8250.

Great British Pound:
Providing his final forecasts before he retires in July, Bank of England Governor Mervyn King declared that a UK recovery is now “in sight” after he said the British economy is expected to grow from 0.3 percent last quarter to 0.5 percent this quarter. In what comes as a welcome change to the economic outlook the recovery is still expected to be a slow and bumpy one. Gaining around 0.3 percent the Great British Pound is stronger against its US Counterpart this morning at 1.5230. Meanwhile against the Aussie the Sterling is stronger at 1.5397 whilst weaker against the Kiwi 1.8479. We expect a range today of 1.5370 – 1.5430.

Majors:
Markets have remained in a bullish mood overnight that is despite the fact the economic outlook only supports the notion that further Central Bank easing is on its way. In figures released overnight US industrial production declined in April by the most in eight months with Manufacturing in the New York Region also shrinking in May. Highlighting that a US recovery story is far from a done deal such figures do emphasise that if a recovery were to occur American manufacturers would be providing very little support to an economy plagued by budget cuts and a weak global backdrop. Halting the advance of the Greenback when valued against the Japanese Yen the US dollar is weaker this morning at 102.256.  Jumping across to Europe and the picture looks equally grim after figures showed the euro-area economy shrank by 0.2 percent in the first quarter of this year. With the Italian economy also contracting by 0.5 percent and France by 0.2 percent Germany has once again been left to fly the flag for the 17-nation bloc having recorded modest growth over the first quarter of 0.1 percent. Triggering an immediate sell-off the euro is weaker this morning at 1.2879.

Data releases
AUD: No data today
NZD:  Annual Budget Release
JPY:  Revised Industrial Production m/m
GBP: 30-y Bond Auction
EUR:  French Prelim Non-Farm payroll q/q, CPI y/y, Core CPI y/y
USD: Building Permits, Core CPI m/m, Unemployment Claims, Housing Starts, Philly Fed Manufacturing Index

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• Australia FX
• Canadian Forex
• NZ Forex
• UK Forex
• US Forex

Current moves appear to be driven in large part by expectations that the FED is nearing the end of its easing cycle. With this in mind, FED member Plosser was quoted stating that the central bank should begin to reduce its open ended asset programme as early as June. He placed emphasis on an improving labour market and consumer spending figures, while suggesting growth would be 3% in 2013 and 2014. He stressed that unless the unemployment rate rapidly deteriorates over Q2/Q3 he would ‘anticipate that we could end the programme before year-end’.

Looking ahead, the UK is under scrutiny this morning while EU GDP numbers hit the wires. The UK Claimant Count is expected to have improved in April at a more sedate pace than March, but the decline, if confirmed, will be welcomed. Shortly afterwards and arise Sir King to provide the eagerly anticipated quarterly inflation report. We’d like to think his message will not be too cryptic; otherwise we will have to wait another week for the BoE meeting minutes. If that isn’t enough, US PPI is expected to post flat at -0.6% when it is released early in the US sessions. Empire State Manufacturing is released at the same time, with industrial production figures shortly afterwards, both of which could very well provide further confirmation that the US is well on the road to recovery. Expect a busy day. We expect a range today in the GBP/USD rate of 1.510 to 1.5350.

Euro
Dollar sentiment was rampant yesterday as the greenback extended its rally yesterday across the board. No major US or UK data was released, so moves were driven by technical, bond and equity markets, and flow. Markets remain firm this morning as Asian equities continued the rally that started as European and US markets climbed yesterday. As the Dollar Index climbs to an almost 1-year-high, the US currency has further strengthened against all majors. GBPUSD has slipped to 1.520, while the Dollar/Yen touched over 102.60. AUDUSD experienced the most dramatic decline as the pair crashed through support levels and 200-period moving average to test 0.9852. EURUSD initially showed a little resilience yesterday, but the broader Dollar rally and poor GDP data from France, Germany and Italy this morning has seen the pair fall to 1.290.

Sterling weakened a little after Prime Minister David Cameron offered to support a bill authorising a legally binding referendum on the UK’s membership of the EU before the end of 2017. Political risk is rising – bearing in mind the Scottish Independence vote next year – and markets are cautious of taking too long a position in Sterling at this stage.

The Euro’s strength against Sterling remains a mystery. GDP data from France, Italy and Germany was diabolical this morning and the region-wide release looks set to be poor when confirmed mid-morning. Perhaps some view Europe as cheap, or don’t want to commit ahead of the BoE, tough we feel a push above 1.180 is likely. A great deal of the Euro’s gains appear to be driven by the bond markets, which have shown themselves to be particularly fickle over the last few years. While data continues to paint a dismal picture and today’s GDP numbers are expected to be poor, the Euro is batting away talk of further ECB intervention, but it is odd that further weakness is not evident. Sterling-bulls will be hoping Sir King provides a particular hawkish inflation report today. We expect a range today in the GBP/EUR rate of 1.1725 to 1.190.

Aussie and Kiwi Dollars
AUDUSD dropped sharply yesterday as markets reacted to the Annual Budget Release. The general tone was surprisingly negative, though there were some voter-wooing initiatives announced. The Aussie Government revised 2013 growth down to 2.75% from 3.00%. Unemployment is expected to increase to 5.75% from 5.5% in 2014. Meanwhile, the budget is not expected to balance until 2015/16 and inflation is expected to stay at 2.25%, which increased the likelihood of another interest rate cut from the RBA. GBPAUD ranged over 1 cent during the day, but generally pivoted around to 1.540 where it remains this morning.

We actually experienced more movement between Sterling and the Kiwi Dollar. GBPNZD tested 1.860, but is refusing to push higher as support dwindles at this level. The pair currently trades at 1.8560. Perhaps a ‘positive’ BoE report will be the catalyst to force higher, otherwise the pair may slip as momentum falls. No data was released by New Zealand today, though there will be plenty from Europe, the USA and UK to keep markets busy. Overnight we will see manufacturing data for the nation, which should be ok. However, the major release is the New Zealand Annual Budget, which could very well cause movements between Kiwi-crosses.

Finally, Japanese GDP data is expected tomorrow morning. The first decent reading in 1-year has been forecasted, so we could see increased volatility during the Asian session. We expect a range today in the GBP/AUD rate of 1.530 to 1.550. We expect a range today in the GBP/NZD rate of 1.840 to 1.8650.

Data Releases
AUD: None
EUR: Flash GDP q/q
GBP: Claimant Count Change, Average Earnings Index 3m/y, Unemployment Rate, BOE Gov King Speaks, BOE Inflation Report
NZD: Business NZ Manufacturing Index, Annual Budget Release
USD: PPI m/m, Core PPI m/m, Empire State Manufacturing Index, TIC Long-Term Purchases, Capacity Utilization Rate, Industrial Production m/m, NAHB Housing Market Index, Crude Oil Inventories

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New Zealand Dollar:
In statistics released from New Zealand yesterday Retail Sales have accelerated by a smaller than expected amount over the past quarter with growth of 0.5 percent coming in well below the forecasted read of 0.9 percent. Setting off on the wrong foot the New Zealand dollar has been sold for much of the past 24 hours not helped by a Greenback which has continued to appreciate. Having started the day at a rate of 0.8247 lows of 0.8180 were briefly as the Kiwi opens this morning weaker by a half a cent as it currently buys 81.99 US Cents. On the outlook today the focus is likely to remain in the US with improved data flows only set to further improve the prospects of the US dollar. We expect a range today of 0.8170 – 0.8230.

Great British Pound:
It has been a familiar story for the Great British Pound overnight which has managed to fair a lot better against both the Aussie and the Kiwi than compared to the Greenback. Tainted by a US dollar which has continued to appreciate, confidence and optimism across the board has come a long in over the past week. In news closer to home a UK house price gauge rose to its highest level in almost three years last month as the government pledged 3.5 billion pound of loans plus 130 billion pound of guarantees in March for the housing market alone. Tumbling to lows of 1.5219 the Sterling opens down against the Greenback (1.5220) however stronger against both the Aussie (1.5383) and the Kiwi (1.8557). We expect a range today of 1.5350 – 1.5410.

Majors:
The US Dollar has continued its recent upward trend over the past 24 hours with data from the world’s largest economy suggesting that growth is slowly improving. With investors once again starting to consider a world without quantitative easing if the Federal Reserve was at some point set to reduce its existing stimulus measures the net effect on the Greenback would be profound. Moving to overnight highs of 102.392 the Greenback’s strength has been there for to see as witnessed by its notably stronger levels against the Japanese Yen this morning which currently sits at 102.36. Despite an overnight session which offered little in the form of economic data there are several critical growth figures due to be released from broader Europe this evening as well as key manufacturing and Industrial Production readings in the US. With the S&P advancing to its eight record high in the past nine session optimism is running high that data flows will continue to support the notion of improved growth. Meanwhile this morning the Euro has struggled to keep pace with the Greenback as it opens weaker by 0.4 percent at 1.2935.

Data releases
AUD: New Motor Vehicle Sales m/m, Wage Price Index m/m
NZD:  No data today
JPY:  Consumer Confidence
GBP: Claimant Count Change, Average Earnings Index 3m/u, Unemployment Rate, BOE King Speaks, BOE Inflation Report
EUR: French Prelim GDP q/q, Italian Prelim GDP q/q, Flash GDP q/q
USD: PPI m/m, Empire State Manufacturing Index, TIC Long-Term Purchases, Capacity Utilization Rate, Industrial Production m/m

For more information, live prices or to execute a foreign exchange transaction please use one of the following links:

• Australia FX
• Canadian Forex
• NZ Forex
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While the CBI’s report was positive, perhaps the reminder that the UK is not performing as well as the US – bearing in mind the US economy expanded eight times the rate of the UK’s during Q1 – was enough for traders to reassess their Sterling positions. EURUSD has been surprisingly robust and a number of bid orders around 1.2950 supported the pair yesterday, while anticipation of an improved ZEW indicator this morning has seen the pair rally back over 1.30. AUDUSD initially dropped to a low of 0.9950 yesterday, but continues to consolidate just below parity as this report is published.

No major data is released from the UK or USA today. We anticipate cable maintaining a tight range, but are cautious given yesterday’s declines and general bearish sentiment hitting Sterling since this week started. EU data could very well cause Euro-crosses to move; decent numbers could see cable push higher as EURUSD consolidates about 1.30 and vice-versa. However, all eyes are ultimately on tomorrow. We expect a range today in the GBP/USD rate of 1.5250 to 1.540.

Euro
Yesterday afternoon was brutal for Sterling-bulls as the currency dropped against 12 of its 16 major peers. GBPEUR made the most damning move as 1.18 surrendered with relative ease and the pair made an unexpected play towards the mid-1.17s where it trades this morning. Recent moves have been surprising given a lack of key UK or EU data and expected releases over the coming days.

EU austerity was under a microscope yesterday as the Eurogroup meetings focused on France, Greece and Cyprus. Markets did appear to be disinterested in comments that the ECB may cut the deposit rate to negative, while Draghi suggested the bank could purchase ABS – something Germany was quick to refute – but the impact was clearly lacking. Sterling may be suffering from talk of a possible exit from the EU. Prime Minister David Cameron is under increasing pressure to take a definitive stance on the matter. Otherwise, it is difficult to identify the immediate cause of the sell-off.

All eyes are on Industrial Production data and German ZEW Economic Sentiment today. Both releases are expected to show improvements, but it would take something special to move the Euro significantly ahead of GDP releases tomorrow. Expect positioning this afternoon, though we could well have experienced such moves yesterday. We expect a range today in the GBP/EUR rate of 1.1725 to 1.190.

Aussie and Kiwi Dollars
Sterling managed to hold on to some of its gains against the Antipodeans yesterday, but the environment turned decidedly bearish during the afternoon and neither GBPAUD or GBPNZD ended near their respective short-term highs.

GBPAUD tested 1.5430, but fell back into the mid-1.530s again. Aussie data had already been digested earlier in the day, so the move looked like positioning ahead of the BoE Inflation Report on Wednesday and Aussie Budget later today. There were some rumblings that the Aussie economy could struggle later in the year, as commentators took to picking-apart the business confidence numbers and stressed the economy became over-reliant on the commodities sector. The budget may not be as contractionary as many are thinking, so a push back over parity against the US Dollar looks likely as the Aussie recovers from its circa 12-month low.

New Zealand retail sales rose less than expected in Q1. The 0.5% release was significantly below expectations at 0.9%, but the fallout was limited as GBPNZD moves below 1.850 this morning. No further data is expected over the next 24 hours. The Kiwi will therefore takes its cues from broader market risk trends and could experience some volatility as its nearest trading partner, Australia, releases its budget later today. We expect a range today in the GBP/AUD rate of 1.520 to 1.550. We expect a range today in the GBP/NZD rate of 1.840 to 1.860.

Data Releases
AUD: Annual Budget Release, Import Prices m/m, Wage Price Index q/q
EUR: German ZEW Economic Sentiment, Industrial Production m/m, ZEW Economic Sentiment, ECOFIN Meetings, French Prelim GDP q/q, German Prelim GDP q/q, French CPI m/m
GBP: CB Leading Index m/m
NZD: None
USD: NFIB Small Business Index, Import Prices m/m

For more information, live prices or to execute a foreign exchange transaction please use one of the following links:

• Australia FX
• Canadian Forex
• NZ Forex
• UK Forex
• US Forex