Australian Dollar: Local results drove the Australian dollar for most of the Asian session yesterday with a mixed bag of data being released. Retail Sales unexpectedly dropped by 1.1% and this saw the Aussie fall from 0.9660 to 0.9620 before recovering off the back of a more favourable Trade Balance, which widened to 2.63 billion. Entering London around 0.9640 the Australian Dollar found some fuel to make an attempt at 97 cents but was pushed back initially by disappointing employment figures from the US. Risk appetite did manage to find a catalyst however with the ECB press conference spurring demand for risky assets and AUD/USD shot through the 0.9700 barrier to only encounter resistance around 0.9770. Settling back today we open at 0.9750 with AIG Services Index due out during the local session. All eyes will be on the US this evening with unemployment figures and Non-Manufacturing PMI known to be major risk events.

We expect a range today of 0.9630 – 0.9790

New Zealand Dollar: Local trade was relatively quiet for the New Zealand Dollar yesterday with the majority of the Asian session spent in a 30-pip range between 0.7480 and 0.7510. Heading into London and New York we saw some volatility enter the currency pair and some less than desirable US data saw the Kiwi hit a low of 0.7455. Demand for the commodity currency soon followed after the ECB press conference and Trichet’s Q&A session boosted investor confidence. Gaining over a cent, the New Zealand dollar tested resistance at 0.7560 and opens today at 0.7540. Poor Australian Retail Sales initially saw the Kiwi gain against the Aussie reaching highs of 0.7800, but the Aussie was to fight back offshore and we open today back down at 0.7730.

We expect a range today of 0.7480 – 0.7580

Great British Pound: The Pound Sterling traded uneventfully during Asia as investors cautiously awaiting word from the ECB later in the trading day. Entering London around 1.5620 a better than expected Construction PMI saw Cable test highs of 1.5660, however an increase in investor sentiment saw a plunge 150 pips to lows of 1.5510. Once Trichet’s words were digested by the markets the Pound staged a recovery back above 1.5600, however any gains were muted by heavy buying of the EUR/GBP cross rate. Currently oscillating around 1.5600 we await the release of Services PMI due during London hours tonight. With demand for commodity currencies increasing the Pound has taken a hit against the antipodeans and currently trades just below 1.6000 against the Aussie and at 2.0670 against the Kiwi.

We expect a range today of 1.5960 – 1.6180

Majors: As expected the European Central Bank left interest rates on hold at 1% overnight; although the markets were focusing on what was to be the accompanying press conference. Speculation had been growing on the ECB stepping in to aid flailing members of the EU and when no new measures to current policy were announced the Euro dropped from 1.3170 to 1.3070 within 30mins of trade. Reassurance was to follow in that asset purchasing would remain as it is until at least 12 April 2011 and aggressive purchasing of Irish and Portuguese bonds as commenced. EUR/USD rallied on Trichet’s reassurance and pushed through to a high of 1.3240. The Greenback has also come under pressure from local unemployment data where jobless claims increased 11,000 more than expected to reach 436K for the month of November. This saw the dollar fall from highs of 84.35 against the Japanese Yen to test 83.50 with news having considerable impact ahead of this evening’s Non-Farm Payrolls, which serve as a major risk event on the economic schedule. With markets already anticipating an 8K drop, yesterday’s figures may put investors on edge and hinder the increase in risk appetite brought on by the ECB.

Data releases

AUD: AIG Services Index

NZD: No data due for today

JPY: No data due for today

GBP: Services PMI

EUR: Retail Sales m/m

USD: Non-Farm Employment Change; Unemployment Rate; ISM Non-Manufacturing PMI

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