Australian Dollar: Asian stocks opened higher yesterday with the ASX gaining 1.1% during its first day of trade for the New Year. Buoyed by better than expected Chinese manufacturing data released over the weekend, these gains in the share market also boosted the Australian Dollar during its local session. After opening yesterday at 1.0220, the Aussie started heading north soon after the ASX opened at 10am, reaching levels near 1.0300 by the time trade moved into European hours.

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With markets choosing to focus on fundamentals ahead of the first euro meeting of 2012, overnight releases from both Europe and the US helped contribute to further improvement in risk appetite. Consequently we have seen the Australian Dollar soar to levels not seen since November 9 and we open this morning at 1.0375 ahead of local Trade Balance figures due to be released tomorrow. With nothing scheduled on the local calendar for today, the Australian Dollar will likely continue to derive its value from risk sentiment and offshore developments for the time being.

We expect a range today of 1.0330 – 1.0410

New Zealand Dolla: The New Zealand Dollar has risen to levels not witnessed in two months, as manufacturing reports from both Asia and the United States fuelled a strong start to equity markets. Pushing from opening levels yesterday around 0.7780 the Kiwi soon rallied above 78 cents and reached around 0.7830 before the switch to Europe.

Positive unemployment figures from Germany also contributed to the risk rally offshore and this morning we open right on the cusp of 0.7900. With the Australian Dollar also trading off the back of risk sentiment the cross rate has settled into a predictably volatile yet narrow range. Moving primarily between 1.3110 and 1.3150 it currently sits right in the middle at 1.3130 (0.7616).

We expect a range today of 0.7850 – 0.7920

Great British Pound: Sterling has gained as a result of broad Greenback weakness stemming from a strong surge in risk sentiment so far this year. In a common trend yesterday it pushed from opening lows around 1.5500 to enter local trade around 50 points higher ahead of a local manufacturing report due for release.

In line with reports from China and the US, UK manufacturing also improved however the index remains below the critical 50 mark which indicates expansion in the sector. Coming in at 49.6, it was enough to provide a slight boost and along with a continuing increase in risk sentiment Cable pushed to 1.5660, trading just off this at time of writing. Coming under obvious pressure against riskier assets, the Pound opens lower against both the Australian and New Zealand Dollars, this morning trading at 1.5090 and 1.9810.

We expect a range today of 1.5000 – 1.5130

Majors: The Greenback extended its decline on Tuesday as better than anticipated manufacturing data from the US contributed to improved risk sentiment following an expansion in China’s manufacturing sector announced earlier this week. The Euro Dollar began the day close to 1.2920 however a strong start to equities in the Asian session dampened the Greenback, pushing the Euro to 1.2980 by the beginning of local hours.

With markets seemingly keen to focus on fundamental releases for the first week of 2012, both a decrease in the German unemployment rate and the aforementioned US manufacturing report added to the risk rally and the Euro continued to highs near $1.3070 against the Greenback, trading this morning at 1.3050. Also weighing on the US currency was the release of the FOMC minutes for the central bank’s December policy meeting, where they agreed to make public for the first time forecasts for the benchmark interest rate at their Jan. 24-25 meeting. As Japan remained on holiday yesterday this sentiment directed the safe-haven pair and the USD/JPY also moved lower to where it trades at time of writing at 76.66.

Data releases:

AUD: No data due for release

NZD: No data due for release

JPY: No data due for release

GBP: Construction PMI; Net Lending to Individuals m/m

EUR: French Consumer Spending m/m; Final Services PMI; CPI Flash Estimate y/y

USD: Factory Orders m/m;