Australian Dollar Hits 18 Year Highs Before Succumbing to the Weight of Gold (page 2 of 2)

The corporate service price index hit a nine year high in May, which suggests that consumer prices could be firm as well.

Before getting too excited, retail sales are up first. Wage growth has been weak so the market is expecting another month of restrained spending in Japan.

Euro Stuck in a Range; Swiss Franc in Play

The Euro has been stuck in a 30 pip range throughout the US session trading session. We are finally seeing the impact of the strong Euro on economic activity.

During April, the Euro rose from 1.3350 to 1.3682 with virtually no retracements. Unsurprisingly, the current account surplus for that month turned into a deficit.

French business confidence is the only piece of noteworthy data on the Eurozone calendar tomorrow and even that is normally not market moving. The bigger story is in Switzerland. The UBS consumption index dropped from 2.384 to 2.089 in May, which was its first drop in six months.

Despite the drop, the index still remains high, which does not write off the possibility of a stronger KoF leading indicator report tomorrow. Economic activity overall has been robust and should continue to be thanks to the weakness of the Swiss Franc.

British Pound Trades Quietly ahead of Blair to Brown Changeover

Like the Euro, the British pound remained range bound throughout the US trading session. The 2.0 level is proving to be a serious point of contention as the GBP/USD fails to close above that price level for the second consecutive day.

There was no UK economic data released overnight, but tomorrow will be a big day. After 10 years of service, Tony Blair will be stepping down as Prime Minister of the UK and will passing the baton over to Gordon Brown. For more details on what this means for the British pound, see our special report on Blair's resignation.

Mortgage approvals and the CBI Distributive Trades survey are also due for release; improvements are expected in both.

Australian Dollar Hits 18 Year Highs before Succumbing to the Weight of Gold

The Australian dollar was the only commodity currency to slip against the US dollar today. Although the biggest drop in new home sales in almost a year could be blamed, it was not the trigger for the day's weakness.

In fact, the AUD/USD hit an 18 year high before reversing all of its gains at the US market open. Instead, gold prices were to blame. Prices of the yellow metal fell to a three month low, dragging the Aussie dollar down with it.

The New Zealand and Canadian dollars remained firm however. Demand for the high yielding New Zealand dollar has been unabated, but tonight's trade balance data could mark a top in the currency pair. Despite the lack of Canadian data and the fall in oil prices, the currency pair benefited from the final approval of the Norwegian based Statoil takeover of Canadian based NAOSC for 2.2 billion Canadian dollars.