Australian Dollar:
The weakness in the Aussie continued for much of our day on Friday after the RBA released their quarterly money policy report which showed a reduction in their growth and inflation forecasts. The report was quite negative and it pointed to mining investment peaking, a high AUD, and no signs of a gain in non-mining investment in the near term. The continuation of the recent dovish tone by the RBA also saw them forecasting GDP to be below trend at 2.5% and unemployment to rise gradually next year. In terms of currency movements, this saw the Aussie weaken to around 1.0260 before finding support and eventually recovering back over 1.03 after some better than expected Chinese data in the form of a wider surplus and ‘on-expectations’ inflation. This morning sees us open at 1.0320 and with only tier two data due out for the most the week and China on the Luna New Year break we will likely take most of our direction from offshore events and local earnings results from banking, mining and retail giants through the week.

We expect a range today of 1.0270– 1.0345

New Zealand Dollar:
With nothing of note released locally on Friday, the Kiwi took most of its direction from trade balance data from China and the US. The two largest economies both provided better than expected data to help push up risk appetite dragging the NZD off a weekly low of 0.83 to eventually close up around 0.8370. Chinese trade balance came in with a larger surplus than the market expected with 29.15b while Chinese inflation data also came in on expectations at 2%. The US data was also quite positive with the deficit narrowing to 38.5b compared to expectations of a 38.5b deficit. The Kiwi remains well supported above 0.83 despite Thursday’s poor reading in local employment and it continues to gain against its Australian counterpart with 1.2300 looking vulnerable. We open this morning little changed from Friday night at 0.8360 with this week is shaping up to be relatively quiet with most of Asia on holiday and minimal local data besides retail sales on Friday.

We expect a range today of 0.8300– 0.8390

Great British Pound:
We find the pound stronger this morning having gained on the back of a falling Euro and comments from the incoming BOE Governor Carney that current monetary policy may be appropriate. Mark Carney was speaking before a UK treasury committee and talked down a chance of any radical changes when he takes over later in the year, this disappointed many investors who were looking for a commitment to more aggressive easing. The fall in the Euro after Draghi’s dovish comments on Thursday night saw a strong move down in the EUR/GBP as it broke below 0.8500 which in turn helped push the pound up against most of its other major counterparts. GBP/USD is currently just below 1.5800 having also strengthened on the back of risk appetite on better than expected US data on Friday night. The focus this week will be local inflation with CPI on Tuesday night and BOE inflation report on Wednesday; meanwhile we open stronger against both the Aussie (1.5325) and the Kiwi (1.8880).

We expect a range today of 1.5280– 1.5360

Majors:
We find the Euro lower at the open this morning after it depreciated on Friday, continuing the fall that began after the ECB''s comments on Thursday night. Draghi’s comments in regards to the strong currency holding back inflation saw the EUR drop below 1.3400 against its US counterpart before Friday’s trading and we spent much of the Asian and European sessions below this level. As we headed into the northern hemisphere trade we had the release of the European budget which saw a 3% cut in the budget ceiling for 2014-2020 after negotiations resulted in an agreement for 960bn Euros of new spending commitments versus the 1.03 trillion Euros initially sought by those countries against austerity. Meanwhile in the US, the main focus was on the narrowing trade deficit which fell to 38.5b USD in December after exports rose to 186.4b and imports fell to 224.9b. This was seen as positive result and may result in an upward revision of GDP for the final quarter of last year which was based on a forecast of a larger deficit. This saw the USD gain against most of its counterparts with EUR/USD falling to 1.3360 although USD/JPY has pulled back somewhat and is currently back at 92.70 after a Japanese finance minister commented that they have been caught by surprise at the pace of the Yen’s depreciation.

Data releases:

AUD:
Home loans, Investment lending

NZD:
No data today

JPY:
Money stock

GBP:
RICS house price balance

EUR:
French industrial production

USD:
Fed member Yellen speaks

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