Australian Dollar: The Australian Dollar lost ground early in the Asian session yesterday as the effects of yesterdays RBA interest rate announcement and accompanying rhetoric continues to weigh on the local unit. With the events of the floods in Queensland still being felt in the local economy (high inflation, negative Q1 GDP etc), clues provided by the RBA gave little away as to when rates will rise locally although some economists have indicated that as early as July or August is when the RBA will go again.

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The Aussie fell from just above 1.07 cents yesterday to an intraday low of 1.0638 despite a positive reading in monthly home loans, with the figure coming in at 4.8%, well up from the previous reading of -1.1%. During the European and US session the AUD traded between 1.0587 and 1.0650 as indifferent comments continue to come out of Europe about Greece and remarks from Fed Chairman Ben Bernanke's Atlanta address that the US recovery is "frustratingly slow" discouraged risk buying.

We expect a range today of 1.0580 to 1.0680

New Zealand Dollar: As expected the Reserve Bank of New Zealand has left the official cash rate on hold at 2.5% at its monthly meeting this morning. In the accompanying statement and press conference, Governor Allan Bollard stated that the economy's outlook has improved and the impact of the recent Christchurch earthquake hasn't hurt the local economy as much as originally feared. NZDUSD initially jumped almost 70 points from 0.8140 to 0.8220 after the upbeat announcement hit the news wires. Overnight was a different story for Kiwi, as risk aversion took hold across the offshore session limiting any NZ dollar advance as concerns in Europe gripped the market once again. Against the Australian Dollar, the Kiwi is changing hands at 1.2938 (0.7729).

We expect a range today of 0.8150 to 0.8250

Great British Pound: The impending Bank of England interest rate decision due out this evening in the UK will garnish the majority of the attention with the market continuing to second guess the BoE as to when it will start hiking rates. Market participants still firmly believe that any increase will occur towards the end of 2011. Still adding interim support to the Pound are the after effects of the recent International Monetary Fund report which pointed towards a smooth road to recovery in the UK but only if they continue with the ongoing austerity measures and spending cuts. During the offshore session, GBPUSD traded between 1.6346 and 1.6438 as Moody's said the UK risks losing its top credit ranking (currently Aaa) should growth remain weak. Against its Southern hemisphere counterparts, the Pound Sterling is changing hands at 1.5420 versus the Australian Dollar and 1.9940 against the New Zealand Dollar.

We expect a range today of 1.5300 to 1.5500

Majors: All eyes this evening will on the European Central Bank and its likely decision on whether interest rates (currently at 1.25%) are set to rise or remain on hold in the 17 nation zone. The market will be watching the accompanying statement delivered by ECB chairman Trichet and whether or not the words "vigilance and high inflation" are used and if so, is it the start of an interest rate tightening cycle in Europe. The EURO has been relatively well supported of late as data out of Europe across a variety of sectors has been coming in positive indicating that that Europe is potentially in far better shape and further down the recovery road than the United States. Overnight saw the release of the Fed's Beige Book which pointed out that the "economic activity generally continued to expand since the last report, though few districts indicated some deceleration". The Greenback rose against the majority of currencies after the release but lost significant ground against the Japanese Yen, eventually hitting an intraday low of 79.68.

Data releases

AUD: Unemployment Rate

NZD: RBNZ Rate Decision

JPY: Final GDP q/q

GBP: Bank of England Interest Rate decision; Trade Balance

EUR: European Central Interest Rate decision

USD: Trade Balance; Unemployment Claims; FOMC Member Yellen and Plosser speak

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