Australian Dollar:
The Aussie’s strong rally since the ‘fiscal cliff’ was averted has come to an abrupt end on the back of the minutes from last month’s Fed meeting which has shown a split in how long the participants want to continue the current money printing programs. Earlier the AUD was looking to have run out of steam anyway as risk sentiment appeared to be weakening across the board as markets look to perceived challenges beyond the fiscal cliff. Levels around 1.0525 have again provided strong resistance and we have gotten close twice over the last 24 hours but both times failed to break it, with the drop early this morning below 1.0470 we now look to 1.0460 as temporary support ahead of major support of 1.0380. Today we have some local tier 2 data in AIF services index before a busy ticket tonight with Eurozone PMI and US unemployment data.

We expect a range today of 1.0445 – 1.0525

New Zealand Dollar:
Despite looking like breaking above 0.8350 levels again overnight we now find ourselves back below 0.8300 having given up most of the ground that was gained after the House of Rep’s approval of the fiscal cliff solution. The release of hawkish FOMC minutes has seen the NZD fall from 0.8320 to our current levels of 0.8280. Yesterday we had the release of Chinese Non-manufacturing PMI for December which came in higher than the previous month at 56.1 (55.6) and continues the Chinese recovery story which has been supporting commodity currencies like the NZD. A fairly quiet Asian session is likely today; with not much to provide direction it is likely we will drift lower but tonight there is plenty to provide direction with the highlight being US Non-farm Payrolls data due for release.

We expect a range today of 0.8250 – 0.8320

Great British Pound:
Yesterday’s retreat to 1.6250 has continued over the last 24 hours and we now find the cable even lower at 1.6100. As the euphoria over the fiscal cliff solution subsided so too did risk sentiment and the European majors were the hardest hit. UK PMI construction index didn’t help things as it came in lower than expected at 48.7; many investors were looking for an improvement from last month and an indication we would be heading towards expansion in the sector. Heading into the US session, losses were accelerated following minutes from the Fed’s December meeting which showed a split in opinion as to when the current asset purchase program should be wrapped up. If the program is finished earlier than expected it will reduce the perceived supply of USD over the next 12 months which would provide support for the reserve currency. This morning we open with GBP/USD at 1.6105 while the pound is weaker against the Aussie (1.5385) and fairly flat against the Kiwi (1.9445).

We expect a range today of 1.5340– 1.5410

Majors:
The ‘New Year’s fiscal cliff aversion’ celebrations couldn’t continue forever and eventually the hangover would set in, bringing with it the realisation there are a lot more problems to deal with over coming months, in particular the debt ceiling which looks like being hit within the next two months. During much of the Asian session the Euro continued to drift lower as risk appetite waned and, despite stronger than expected German unemployment, the falls were accelerated through Northern Hemisphere trading on the back of hawkish FOMC minutes. The unemployment rate in Germany remained steady at 6.9% while unemployment only rose 3k versus 10k expected, despite this there are still major concerns on growth in Europe based on other recent data releases. Over in the US the highlight of the night was the Federal Open Market Committee’s minutes from their December meeting which surprisingly talked down the need for extending the asset purchase program beyond this year. There was even a divide as to whether the program should be allowed to run beyond the second half 2013. With many investors initially expecting the Fed would be printing at current levels or higher until well into 2014, the scale back of these bets has seen the USD gain back much of the ground lost since the fiscal cliff was averted. EUR/USD is now significantly lower, trading at a three week low of 1.3060, while USD/JPY is back at highs of 87.30 as we look towards tonight’s main focus of US Non-farm payrolls.

Data releases:

AUD:
AIG Services

NZD:
No data today

JPY:
Bonds and stocks buying

GBP:
Mortgage approvals, Net lending, Consumer credit

EUR:
PMI, German Retail sales, Eurozone CPI index estimate

USD:
Non-farm payrolls, Unemployment rate, ISM Non-manufacturing composite, Factory orders