AUD
The AUD did not continue its stellar performance over the last week as risk appetite has waned and interest rate expectations wavered despite there being positive economic data both locally and abroad. Last week began with third quarter PMI (0.2%) and CPI (1.3%) figures failing to spur the market to continue the bullish run on the Australian dollar despite both outperforming the previous quarter. It was widely commented that the PMI and CPI figures were considered lacklustre and didn’t provide for a shock 50 basis point interest rate hike. There was also a definite absence of hawkish comments by the RBA last week, which would have weighed on market sentiment towards the AUD.

On the risk appetite front, US GDP (3.5%) was significantly better than the previous quarter (-0.7%), however was treated with caution as it was during a period of significant government support for both the automotive industry ‘cash for clunkers’ and the housing market. Equity and commodity markets rebounded as a result, however this offered only a brief reprieve for the AUD which then slumped to touch on the lowest levels for the past three weeks as the S&P500 and risk appetite continued to track downwards for the week.

**Interest Rate Decision**

Yesterday, the RBA raised the cash rate 25bp to 3.50% and the local and overnight markets have been bearish on the AUD as a result which has continued its downward shift.

The week ahead in Australia
Monday 2nd – RBA Commodity Index.
Tuesday 3rd – RBA Interest Rate Decision.
Wednesday 4th – Building permits.
Thursday 5th – Trade Balance, RBA’S Governor Glen Stevens Speech.
Friday 6th – RBA Monetary Policy Statement.

AUDUSD
The pairing trended downwards for most of the week starting at 0.9204 and closing the week at 0.9128 with an gains on Thursday spurring the pairing to 0.9180.

The week ahead in the US:
Monday 2nd – ISM Manufacturing, Pending Home Sales, Construction Spending.
Tuesday 3rd – Factory Orders, ABC/Washington Post Consumer Confidence.
Wednesday 4th – MBA Mortgage Applications, ADP Employment change, ISM non-manufacturing, EIA Crude Oil Stocks Change, Fed Interest Rate decision.
Thursday 5th – Continuing Jobless Claims, Initial Jobless Claims, Nonfarm Productivity, Unit Labor Costs.
Friday 6th – G20 Meeting, Average Hourly Earnings, Average Weekly Hours, Nonfarm Payrolls, Wholesale Inventories, Consumer Credit.

AUDGBP
The pairing lost ground for most of the week, starting at 0.5643 and closing at 0.5518.
 
The week ahead in the UK:
Monday 2nd – PMI Manufacturing.
Tuesday 3rd – PMI Construction, Halifax House Prices,
Wednesday 4th – Nationwide Consumer Confidence, PMI Services, BRC Shop Price Index.
Thursday 5th – Industrial Production, Manufacturing Production, BoE Interest Rate Decision.
Friday 6th – NIESR GDP Estimate, PPI.

AUDEUR
There was volatility in the pairing this week starting the week at 0.6132, reaching levels of 0.6190 on Wednesday morning then losing ground to 0.6080 on Thursday. It then recovered lost ground to close at 0.6154.

The week ahead in the Eurozone:
Monday 2nd – PMI Manufacturing.
Wednesday 4th – PMI Services, PPI.
Thursday 5th – Retail Sales, ECB Rate Decision, ECB Trichet’s speech.
Friday 6th – Factory Orders (Germany).

NZD
The NZD dollar weakened over the last week as risk appetite withdrew from the market as overseas equity markets fell. Prime Minister John Key confirmed that there was little opportunity to weaken the currency also saying that ‘a lower exchange rate will enable us to promote economic growth faster’. The trade deficit figure last week was significantly better than expected, decreasing for the month of September (-424million), however this was largely on the back of falling imports.

Business Confidence (48.2) is still strong in New Zealand and as expected, interest rates were kept on hold at 2.5%. Inflation increased above expectations for the third quarter which increased speculation about a rate increase in the first half of 2010. It is unlikely however that the RBNZ governor will release statements with regard to interest rate speculation, to avoid strengthening in the NZD prematurely. The NZD is already the best performing out of 16 major currencies over the last 6months.

The week ahead in NZ:
Monday 2nd – Labor Cost Index.
Tuesday 3rd – ANZ Commodity Index.
Wednesday 4th – Unemployment Rate.

AUDNZD
The NZD weakened throughout the week against the AUD, initially opening at 1.2192 and then closing at 1.2520.

GBPNZD
The pairing strengthened last week, beginning the week at 2.1580 and closing the week at 2.2608.

EURNZD
The pairing strengthened throughout the week, starting at 1.9870 and closing the week at 2.0277.

NZDUSD
The NZD lost ground against the USD last week, hitting a low of 0.7160 on Thursday and closing the week at 0.7291.