Aussie and Pound Pressured, Greenback Strenghtens Overnight

AUS Reserve Bank of Australia Lowers Rates to 7%

The Reserve Bank of Australia lowered rates to 7% from 7.25%, the first reduction in the benchmark interest rate in nearly 7 years. Governor Glenn Stevens says that demand is being restrained by tight financial conditions, higher fuel costs and lower asset values. With inflation expected to cool, the Bank now moves to shore up economic growth.

AUD/USD - Aussie Pressured Following Interest Rate Cut by RBA

The Aussie, which was already falling this week, slid 260 pips against the Dollar in the aftermath of the release. That puts the pair at its lowest level all year. With more cuts expected in the near future, the Aussie is likely to be pressured for the rest of 2008.

SWZ Consumer Prices Decline 0.3% in August

Consumer prices in Switzerland declined for the month of August, decreasing 0.3%. That resulted in an annual rate of 2.9%, which brings the index back to its levels in May and June, compared to July's 3.1%. It may be a sign that, just like in other economies, inflation may have peaked over the summer, though there needs to be more data to confirm that.

SWZ GDP Grows 0.4% in 2nd Quarter, Higher Than Expected

The Swiss economy grew by 0.4% in the 2nd quarter, slightly above expectations. The better than expected quarterly growth was driven by household spending and foreign trade. However, the annualized rate was only up 2.3%, lower than forecast.

USD/CHF - Swiss Franc Falls to Dollar Following Inflation and GDP Figures

Despite the better than expected Swiss GDP, the US Dollar gained about 100 pips against the Swiss Franc as lower inflation means the pressure on the Swiss National Bank to raise rates has eased.

UK Construction PMI Shows Contraction, But Beats Forecast

Activity in the UK construction sector contracted for a 6th month in August, though the 40.5 reading was an improvement on the last 2 months. The figure also beat forecasts, which had the PMI dropping to a new series low at 36.0.

GBP/USD - Pound Falls Below 1.78 vs Dollar

Despite the better than expected result the Pound has been in a free-fall against the Dollar, hitting a low of 1.7785 prior to the NY open. That's close to a 500-pip drop from the pair's high last Friday.

GBP/JPY - Pound Slides vs Yen to Start Week Prior to BOE

The Pound also fell heavily against the Yen, though most of the losses were concentrated in the previous session. Since Friday's open around 200.25, the pair slid almost 750 pips to test support near 192.60 last evening. The Pound managed to recover somewhat in overnight and NY trading. The Bank of England meets on Thursday.

EUR PPI Jumps to Annual Record of 9%, But Relief May Be Coming in August Data

In the Euro-zone, producer prices continued to increase in July, with the monthly rate up 1.1%, and the annual rate hitting a new record at 9.0%. Both figures were slightly below expectations. The ECB hopes that July marks the peak of inflation, and that August will show lower readings. The ECB will most likely stay put at 4.25% when it decides on rates Thursday morning.

EUR/USD - Euro Slides to Fresh 6-Month Low vs Dollar

The Euro-Dollar slid 100 pips overnight, to a fresh 6-month low. The PMI release stopped the fall and the pair consolidated around the 1.45 after that. The Euro got a little boost following US releases at 10 AM.

US ISM Manfucaturing Index Hits Expectations, Prices See Easing

In the US, ISM manufacturing indicated a slight decline in manufacturing during August, measuring 49.9, which matched expectations. The report showed the first signs of lower prices as the Prices Index fell significantly, though it still remains at an inflationary level.

US Construction Spending Down 0.6% for July

Construction spending fell 0.6% in July, more than expected, as the housing slump continues. It's the largest decline since February. In a bit of good news from the release though, June's figure was revised up to show a 0.3% increase compared to the originally stated 0.4% decline.

Upcoming Releases

Tonight the UK releases data on consumer confidence, while Australia posts its Services PMI and GDP for the 2nd quarter. Overnight, we get services PMI's from the UK and the Euro-zone. The UK also posts its BRC shop price index.

Continuing overnight, the Euro-zone has two more releases, retail sales and its revised version of GDP and the UK will release a measure of housing prices. Tomorrow, the Bank of Canada will conclude its meeting and decide on rates. The US meanwhile posts factory orders.