Australian Dollar
The Australian dollar marched ever so slightly higher throughout onshore trade yesterday as optimism towards the forming of a Greek pro-austerity government and the prospect of stimulus action from the Federal Reserve gave markets a sense of optimism. Touching highs of 1.0210 it looked for awhile that the Aussie may just be able to weather heavy resistance at these heights although the FOMC meeting brought with it a mixed reaction, choppy trade and ultimately a dampening of earlier momentum. The Aussie trades this morning back at 1.0180 after US central bankers downgraded forecasts for economic growth of the world’s largest economy, as well refraining from adding any further quantitative easing; further direction is now likely to be taken from Chinese manufacturing data today as well as the reaction of local equities markets to overnight developments.

We expect a range today of 1.0120 – 1.0220

New Zealand Dollar
The New Zealand was placed under some pressure early on yesterday after it was revealed the current account deficit had increased $0.6 billion from the December 2011 quarter. Driven by a move of goods and services into deficit for the first time since 2008, the Kiwi fell to then trade around 0.7950 for the rest of the Asian session. The forming of a new Greek government and anticipation of FOMC action drove the NZD/USD to levels above 0.7980 although choppy trade following the FOMC failed to hold these levels and we are back this morning at 0.7950. The NZD/AUD has lost ground following the aforementioned current account figures and this morning trades at 0.7815. Key focus today for the New Zealand dollar will be quarterly GDP figures due out this morning, where economists are predicting 0.5% growth for the first quarter this year.

We expect a range today of 0.7900 – 0.7990

Great British Pound
Sterling faltered following the release of the minutes from the MPC meeting earlier this month, as it showed 4 out of the 9 central bankers voted to step up its asset purchasing program to help the domestic economy. Dropping sharply from earlier levels around 1.5720, Cable dipped below 1.5670 before recovering quickly back to pre-release levels. Despite also an increase in the claimant count as well as volatility surrounding the FOMC meeting, levels this morning still hold above 1.5700. Antipodean cross rates have also remained in similar territory with GBP/AUD at 1.5430 and GBP/NZD at 1.9740. Today’s calendar holds retail sales figures and industrial order expectations.

We expect a range today of 1.5370 – 1.5500

Majors
The US Federal Reserve cut its forecast for economic growth last night at the same time it announced intentions to extend its current stimulus program, ‘Operation Twist’ until the end of the year. A mixed reaction was seen in the markets as many were disappointed that the FOMC meeting did not produce a more aggressive approach to stimulating an economy they acknowledged was flagging. Others saw it as a good sign the Fed was not yet ready to play its trump card. As a result, the Greenback seesawed from 1.2640 to 1.2740 against the Euro dollar and finally back to 1.2700 at time of writing; gains were made against the Japanese Yen to 79.60 as pre FOMC depreciation pressures were eased. The euro also trades supported today on overnight news that the New Democracy coalition is official, although the bigger picture still remains focused on the peripheral countries and their cost of borrowing. Also of concern is the health of the European economy and thus markets will be watching keenly German PMI this evening, as well as current account figures and European PMI. The US has their weekly unemployment claims scheduled alongside existing home sales and the Philly Fed manufacturing index.

Data releases:

AUD: RBA Bulletin

NZD: GDP q/q

JPY: No data due for release

GBP: Retail Sales m/m; CBI Industrial Order Expectations

EUR: German PMI; Current Account; European PMI

USD: Unemployment Claims; Existing Home Sales; Philly Fed Manufacturing Index

CNY: HSBC Flash Manufacturing PMI