Australian Dollar:
The deal put forward by the Senate prior to yesterday’s open was passed by the House of Representatives during our session yesterday and it has seen a solid jump in the Aussie. The AUD was already trading strongly after the Senate announcement but following confirmation by the House just before midday our time we saw the brakes well and truly come off the Aussie sending us through 1.04 and back towards levels not seen since mid-December when the fear of the fiscal cliff began to set in. We eventually reached a high overnight close to 1.0520 before settling down to today’s open just below 1.05. With little in the way of local data it appears we will continue to trade the euphoria for the next 24 hours before reality sets in that there are still a lot of problems left to solve.

We expect a range today of 1.0465 – 1.0535

New Zealand Dollar:
The Kiwi has started the year very strongly, although mostly just off the back of actions taken by US politicians. The US House of Representatives passed the bill put forward by the Senate, effectively bringing the US budget back from the edge of the cliff and sending all risk correlated assets, including the NZD, soaring. While most New Zealand investors were enjoying the second day of the New Year break the market was pushing the Kiwi up over 1% pushing it to within sight of 0.84 against its US counterpart. Heading into offshore trade it looked like we may get over the big number figure but we eventually ran out of steam just short. Profit taking late in the US session sees us open this morning quite a bit lower at 0.8326 but we should still find strong support above the 0.83 level. Meanwhile the NZD/JPY cross continues to perform well and has seen us reach an overnight high above 73 which is the highest since September 2008.

We expect a range today of 0.8300 – 0.8400

Great British Pound:
The pound hit a five month high against its US counterpart overnight following the approval of the deal to avoid the fiscal cliff and UK manufacturing data outperforming expectations. The announcement of the US fiscal cliff compromise saw the pound break through 1.6350 during Asian trade before it found further support on the back of a jump in British factory activity. The Purchasing Managers’ Index jumped from 49.2 in November to 51.4 in December, way above expectations of 49.1, and a 15 month high. Anything above 50 indicates growth in the sector and may indicate that the economy as a whole could be due for a strong a quarter overall. This saw the sterling hold up relatively well compared to other currencies as it stayed above 1.6300 through most of the US session before finally succumbing to profit taking to currently trade at 1.6250. Meanwhile we find it weaker against the Aussie (1.5478) and flat against the Kiwi (1.9501).

We expect a range today of 1.5405– 1.5520

Majors:
The deal that was struck by the US Senate prior to yesterday's open was passed by the US House of Reps with a 257-167 bipartisan vote during Asian trade which saw risk rise and the US dollar and Japanese Yen fall. The deal struck while averting the massive fiscal shock to the market didnt solve all of the problems and there will still be cuts made to certain government services and a need to revisit many of the issues over coming months. Many investors had already started making preparations for a life at the bottom of the cliff so with the politicians coming to a semi-solution at the last minute a relief rally has well and truly set in, sending markets to multi-week highs and EUR/USD close to 1.3300. The Japanese Yen in particular has fallen hard on the back of general risk appetite combined with comments from Prime Minister Abe that he was committed to a further support for the economy and a weaker currency; we currently find USD/JPY above 87 for the first time since mid-2010. Going forward, with the dark clouds that held over the market finally lifted we should start to see traditional market data start to take focus again, speaking of which, tonight sees German employment data followed by minutes from FOMC meeting from last month.

Data releases:

AUD:
No data today

NZD:
No data today

JPY:
No data today

GBP:
Nationwide house prices, PMI construction

EUR:
German unemployment,

USD:
FOMC minutes, Initial jobless claims