Australian Dollar:
After spending much of Friday stuck between 1.0365 and 1.0385, the Aussie finally managed to break free of this tight range after some disappointing US data helped it get through 1.04. With a close above this level, many investors were expecting us to open at similar levels, gearing up for a day of trading above 1.04. Unfortunately after markets closed on Friday night the announcement of a bailout for Cyprus, and the conditions that accompany it, has seen a risk aversion theme return to the market and we find the Aussie back at 1.0350 this morning. The main issue causing investor concern is the levy of 9.9% on deposits in the country’s banks and the precedent it may set for future bailouts; leading to the potential for a run on the banks in other peripheral countries in the future. Developments in the story will likely continue over the next 24 hours, overshadowing the mostly tier two data out today.

We expect a range today of 1.0315 – 1.0385

New Zealand Dollar:
Like other risk-correlated assets we find the Kiwi significantly lower this morning as investors remain concerned over the developments in the Cyprus bailout story. It was a different story on Friday night however, as a falling USD pushed us back up over 0.8250. After reaching lows near 0.8160 on Thursday after the RBNZ rate decision, it looked as if we would be regaining much of those losses in time for the open this morning, as US inflation data indicated the Fed would have room for further easing and NY manufacturing data disappointed. We instead find us back at 0.8225 and markets locked on news feeds out of Europe as debates continue in Cyprus. Meanwhile locally there won’t be much for the first half of the week but on Thursday we have GDP, which was highlighted by Wheeler in his comments last week as a key piece of data for future direction.

We expect a range today of 0.8185 – 0.8250

Great British Pound:
The pound has done well not to fall like most other currencies as the problems in Cyprus continue to rock markets. With risk aversion kicking in at the open this morning, most currencies have fallen against the USD and JPY but the sharp fall in the Euro seems to have supported the GBP and it remains relatively flat, holding 1.5125. The sterling staged a recovery at the end of last week after Governor King stated that the central bank is not, and will not attempt to influence the currency. The pound has held onto those gains above 1.5100 after trading as low as 1.4850 mid last week. With EUR/GBP reaching lows of 0.8535 the pound has carried this strength through to gains on both the Aussie (1.4615) and the Kiwi (1.8375). This week is shaping up for a busy one with three major pieces of local data in UK inflation, employment and the Bank of England minutes.

We expect a range today of 1.4580 – 1.4645

Majors:
Concerns over the bailout in Cyprus has seen the USD open stronger this morning against most major currencies, except the Yen, as risk aversion kicks back in. On Friday night some poor US data initially saw the greenback weaker against its major counterparts as investors continued the recent correlation of US data to US Dollar. The most negative release was consumer confidence which fell to 71.8 from 77.6, and was much lower than the expected reading of 78. While it has been expected that the American consumer would begin take a more negative view following tax hikes that kicked in at the start of the year, it was thought it would take at least another month to feed through to the data. This initially saw EUR regain the 1.3 level and even push towards 1.31, however with the bailout in Cyprus being announced after markets closed, this morning has seen a complete reversal of all gains on Friday night and we now open at 1.2930. Developments in the bailout plan continued over the weekend and an emergency debate initially scheduled for Sunday night has now been postponed, creating uncertainty in the markets and causing a risk sell-off. The Japanese Yen was initially weaker on Friday night, as the Japanese parliament officially confirmed the three new BOJ members; however it too has strengthened on risk aversion and USD/JPY opens at 94.35. With minimal data today, it is likely markets will continue to follow developments in the Cyprus story.

Data releases:

AUD:
New motor vehicle sales,

NZD: Performance services

JPY:
BOJ Governor stepping down

GBP: Right move house prices

EUR:
Eurozone trade balance

USD:
NAHB housing market index