Australian Dollar:
The Aussie has fallen back below 1.03 again overnight however it did hold recent ranges, finding support above 1.0260 with markets lacking direction for the time being. Yesterday saw home-loan approvals drop by 1.5% in December versus expectations of a 0.1% gain, which is the lowest level in over two years and the third straight monthly loss. This combined with last week’s dovish comments from the RBA continues to provide downward pressure on the AUD but with markets fairly quiet for the time being any significant moves are limited. Support was also found in the local share market yesterday with large retailers leading the way with better than expected corporate earnings. Later today we have NAB business confidence which should take centre stage as most Asian markets remain closed. This morning we find the AUD currently trading at 1.0275 against its US counterpart.

We expect a range today of 1.0240– 1.0330

New Zealand Dollar:
The Kiwi is again looking like taking out 0.84, although with very little going on in the way of data or news releases we may struggle for any meaningful break until the second half of this week when Asian markets return and we see the release of local retail sales data. For the time being the rise in the Kiwi has been driven by falls in other currencies with AUD/NZD falling below 1.23 after poor housing data yesterday and the NZD/JPY breaking back above 78 with more talk from Japanese officials driving their currency lower. Overnight we approached 0.7380 against the USD and we open this morning slightly lower at 0.8360. Credit card spending is due locally soon, however this is unlikely to move markets any great deal.

We expect a range today of 0.8320– 0.8395

Great British Pound:
Weakness returned to the pound last night as investors begin speculating that this week’s inflation data will disappoint. There are also concerns regarding the Wednesday night’s inflation report from BoE and the likely-hood it would include reduced growth forecasts, this combined with a somewhat strengthening Euro has put us back in recent territory of pound travelling inversely to Euro. EUR/GBP is now back above 0.8550 at the same time GBP/USD has fallen below 1.5675. The market’s attention will be squarely on the UK Consumer Price Index data due out tonight and with little significant data due anywhere else expect most pound crosses to also move on the back of this data. Speaking of crosses, the pound is now weaker against the Aussie (1.5270) and the Kiwi (1.8750).
We expect a range today of 1.5200– 1.5295

Majors:
The Euro spent much of last night trading on either side of 1.34 against its US counterpart as mixed comments fed through in regards to whether European officials believe the currency is currently overvalued. We have already seen French officials, including Hollande, comment that the strength of the Euro is affecting their competitiveness and last night there was a repeat of this tune by other French officials. On the other side of the coin we have Germany, which holds the opinion that the Euro is not overvalued and last night this point was reiterated by Jens Weidmann, an ECB council member from Germany. Weidmann stated that European officials should avoid any policies or efforts that specifically try to weaken the currency as it could lead to increased inflation (which Germany is historically fearful of). This also comes at a time when the G7 are due to meet and one of the key topics is expected to be the ‘currency wars’ that are developing. Sticking to currency devaluation, the past 24 hours saw weakness return to the Yen after a future BOJ candidate, Haruhiko Kuroda, pledged support for Prime Minister Abe’s economics policies, particularly the 2% inflation target. The Japanese Yen has weakened against all of its major counterparts with USD/JPY currently at 93.85 and EUR/JPY is at 125.70 while EUR/USD remains steady just below 1.3400.

Data releases:

AUD:
NAB business confidence, Credit card purchases and balances

NZD:
Credit card spending

JPY:
Money stock, Machine tool orders

GBP:
Retail price index, Producer price index, Consumer price index

EUR:
No data today

USD:
Mortgage delinquencies, small business optimism, JOLTs job openings