Australian Dollar: Comments from a Chinese banker pertaining to monetary policy saw the Australian Dollar finish yesterday's local session almost half a cent higher. Bank of China chairman Xiao Gang said there was limited room for the central bank to raise reserve requirement ratios, adding there was still some room for interest rate increases. His comments gave rise to an afternoon rally, taking our local dollar from 1.0120 to enter offshore trade at 1.0165.

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Upward momentum continued into the European and North American session as talk of the Fed maintaining quantitative easing weighed on the Greenback and highs near 1.0190 were tested towards the end of offshore trade. Opening today still up there at 1.0180, investors anxiously await some key monthly releases with Retail sales and Current account figures out this morning ahead of this afternoon's cash rate and accompanying statement from the RBA. Also of note is Manufacturing PMI.

We expect a range today of 1.0140 - 1.0220

New Zealand Dollar: The New Zealand Dollar opened this week's trade relatively unchanged from Friday's close just above 0.7500 and these levels were maintained for the course of onshore trade. A slight boost to the Kiwi came from the nation's Trade Balance which was revealed to be 11M as opposed to -25M, the first trade surplus for New Zealand in seven months. Record-high commodity prices helped buoy exports of milk powder and lumber and this surplus can only provide some much needed support to the economy. Surveyed Business Confidence also showed improvement, and the Kiwi continued into offshore trade to reach a high near 0.7550 and currently holding at 0.7520/30. The Australian dollar returned to Friday's highs against the New Zealand Dollar, rallying during the North American hours to reach 1.3545 and the currency pair opens this morning at 1.3526

We expect a range today of 0.7480 - 0.7560

Great British Pound: After a poor end to last week the Pound has strengthened against most of its major trading partners as a surge in oil prices once again raise speculation on a Bank of England rate hike. Investors seem to have quickly forgotten the impact of yesterday's revised GDP and its influence on monetary policy and once again its odds on for a restrictive monetary policy stance. Cable jumped from 1.6100 to encounter some temporary resistance at 1.6200 before steadily climbing to highs of 1.6270. Sterling also posted gains against the Aussie, briefly breaking through 1.6000, and the Kiwi trading at 2.1600/20. This evening holds the Nationwide house price index and Manufacturing PMI.

We expect a range today of 1.5920 - 1.6050

Majors: The Greenback has fallen to its lowest levels since November as words from both the ECB and the FED are analysed by investors. It seems likely that Federal Reserve Chairman Bernanke will signal to Congress the US central bank plans to maintain quantitative easing policies. On the contrary, ECB President Trichet has been seen of late taking a hawkish stance and it is speculated he may indicate this week a readiness to raise interest rates, with the next monetary policy meeting on March 3. The Euro rose over a cent to reach highs of 1.3850 and the Greenback remained capped below 82.00 against the Japanese Yen. Lower than expected CPI figures from Europe did keep a cap on the single currency's rally however, and we open this morning right on the 1.3800 handle. The Japanese Yen is trading at 81.75 with a full economic docket ahead today.

Data releases

AUD: Retail Sales m/m; Cash Rate; Commodity Prices y/y; AIG Manufacturing Index

NZD: ANZ Commodity Prices m/m

JPY: Household Spending y/y; Average Cash Earnings y/y;

GBP: Nationwide HPI m/m; Manufacturing PMI; Net Lending to Individuals m/m

EUR: Unemployment Rate; CPI Flash Estimate y/y; German Unemployment Change; Final Manufacturing PMI

USD: ISM Manufacturing PMI; Construction Spending m/m

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