Australian Dollar
The Australian dollar has remained supported in the mid 1.04’s and daringly undertook a challenge for 1.0500 as the primary funding vehicle for the euro-zone was given the all clear to partake in the Europe’s economic recovery. The market reaction was positive as investors took risk on board and closed out short positions with the Aussie rallying to highs marginally above $1.05 against the Greenback as a result. Settling back around similar levels to yesterday, the key focus today will be the outcome of the FOMC meeting in the US where many are keenly anticipating stimulus measure to be announced. If so this would have a positive effect on the Australian dollar as a result of the measures supporting global markets, as well as directly weakening the US Dollar as the underlying currency.

We expect a range today of 1.0420 – 1.0520

New Zealand Dollar
The Reserve Bank of New Zealand left domestic interest rates on hold at 2.5% first thing this morning, with Governor Alan Bollard stating weakness in the outlook for overseas trading partners and the euro-zone economy is likely to result in modest economic activity for New Zealand over the next few years. Despite the schedule for the next interest rate rise seemingly being set back the Kiwi showed little reaction and remains firmer following the German ruling in favour of the ESM. Risk appetite now looks for its next shot of adrenaline from tonight’s FOMC statement and anticipated stimulus measures, if announced, could give rise to a further rally. Sitting on the 0.8200 handle this morning against the Greenback after reaching highs of 0.8230, the New Zealand dollar remains relatively unchanged against its Aussie counterpart and the pair sit at 1.2755 (0.7840).

We expect a range today of 0.8150 – 0.8250

Great British Pound
The British Pound has continued on its upward path against the Greenback, as the Dollar remains weak ahead of this evening’s FOMC statement and a key element of the Euro-zone recovery, the ESM, is approved by the German Constitutional Court. Earlier in the session, an improvement in the number of people claiming unemployment-related benefits helped give Sterling a lift and the over-all result was a rally to four months highs above 1.6120 before settling back to start the Asian session around 1.6100. The positive reaction by the euro as well as risk-related currencies has seen the Pound lose ground on some of the crosses; trade against the shared currency falling below 1.2470, GBP/AUD hit lows of 1.5340 and GBP/NZD found support around 1.9580.

We expect a range today of 1.5320 – 1.5450

Majors
The euro has rallied above 1.2900 against the Greenback for the first time in four months after the long awaited ruling on the ESM was handed down by the German Constitutional Court overnight. The permanent euro-area rescue fund, known as the European Stability Mechanism, was given the all clear after groups attempted to have the mechanism blocked on unconstitutional grounds. With a key element of uncertainty eliminated from the marketplace, the shared currency unit afforded a rally above 1.2930 before settling around the 1.2900 handle this morning. Weakness in the US Dollar is also a factor in play at the moment as the two-day long FOMC meeting resumes this evening and the accompanying statement is scheduled, where many are expecting a rather dovish outlook for the world’s largest economy. Slipping against the Euro as previously mentioned, the Greenback also dropped to 77.70 against the Japanese Yen in anticipation of potential stimulus measures that would serve to debase the underlying currency; the pair open today just above 77.80.

Data releases:

AUD: MI Inflation Expectations; RBA Bulletin

NZD: Official Cash Rate; RBNZ Rate Statement; Business NZ Manufacturing Index

JPY: No data due for release

GBP: 10-y Bond Auction

EUR: ECB Monthly Bulletin

USD: FOMC Statement; PPI m/m; Unemployment Claims