Australian Dollar
The Australian Dollar rallied off opening levels yesterday as Australian business confidence rose to its highest level in seven months, a survey by National Australia Bank showed. Rising from 1.0590 to 1.0640 during local hours, the Aussie was also given a lift after the IMF said it does not see ‘hard landing’ risks in China and Greek PM Lucas Papademos said his government was close to a deal to ease its crippling debt burden. This risk rally continued well through the European session as markets remained hopeful towards a Greek deal however as it became apparent this may not be finalised until mid-February, the Aussie was knocked from its perch. Failing to break resistance at 1.0680, the local unit fell to break below the 1.0600 handle before a slight recovery brought us to today’s open of 1.0615. On the calendar today is local housing data as well as manufacturing figures from our largest trading partner, China.

We expect a range today of 1.0570 – 1.0680

New Zealand Dollar
New housing approval numbers rose 2.1% in December, helping the New Zealand Dollar rally from opening levels of 0.8185. Also lifted higher by a statement from the International Monetary Fund, which said they do not see risks of a ‘hard landing’ in China, and confirmation from the Greek Prime Minister that a deal is close with their bond-holders, the Kiwi saw highs above 0.8235 into the move offshore. Continuing risk sentiment sent the local unit to eventual highs above 0.8290 however the pair was not able to break resistance to reach 0.8300. Falling back to 0.8250 this is where we open this morning ahead of a quiet day on the domestic front. Against the Australian Dollar the Kiwi has gained some ground opening today at 0.7780.

We expect a range today of 0.8210 – 0.8300

Great British Pound
The British Pound strengthened to its highest level since November as the Greenback weakened amid speculation a deal was soon to be reached between Greece and its private bondholders. Rallying to levels around 1.5790, Sterling initially ran into some headwinds when UK consumer credit figures hit a record low in December, highlighting the road to economic recovery is still long and hard. Ultimately, the 1.5800 barrier was out of reach and when it became apparent that a Greek deal was not going to be reached in the short-term at least risk appetite waned and Cable fell back to today’s opening levels of 1.5760.Against its higher-yielding counterparts, Sterling has gained some tentative ground taking it to 1.4840 against the Aussie and it holds around 1.9100 against the Kiwi. Relevant to the value of the Pound today is local manufacturing PMI as well as ongoing fluctuations in risk sentiment.

We expect a range today of 1.4720 – 1.4880

Majors
The Euro climbed to highs above 1.3200 overnight before falling sharply to find support at 1.3050 with a multitude of events kept investors on their toes. Earlier in the day Greek PM Lucas Papademos said his government was close to a deal to ease its crippling debt burden, and this optimism led markets on a risk rally despite the rate of European unemployment remaining at highs of 10.4%. As the session wore on it became apparent a deal between Greece and its private bondholders was further off than implied and with speculation this could now drag on until February 13th, the Euro dropped to aforementioned support of 1.3050. Adding to the deterioration of risk sentiment and hence the rise in the Greenback was disappointing consumer confidence and Chicago PMI from the United States. With the Chicago index of business activity an important barometer for the health of the entire nation, a fall to 60.2 from the previous 62.5 was understandably disappointing for a recovering economy. The Japanese Yen has also remained close to 3 months lows, 76.20, on heightened risk aversion and speculation is beginning to circulate as to a potential Bank of Japan intervention.

Data releases:

AUD: AIG Manufacturing Index; HIA New Home Sales m/m; HPI q/q

NZD: No data due for release

JPY: Average Cash Earnings y/y

GBP: Manufacturing PMI; Nationwide HPI m/m

EUR: CPI Flash Estimate y/y; Final Manufacturing PMI

USD: ADP Non-Farm Employment Change; ISM Manufacturing PMI; Crude Oil Inventories