Australian Dollar: NAB Business Confidence reported an index of zero during the Asian session yesterday. This figure was down 6 points from May and an indication businesses are uncertain as to whether conditions for them are improving or worsening.

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After already opening the session on the back foot, this put the Australian Dollar under further pressure and it fell sharply to a low of 1.0580. As the session wore on downward pressure got the best of the Aussie and by the start of the European session the pair was trading below 1.0530.

Not to be deterred however the Aussie set about paring these gains and despite a brief hurdle in the form of a Moody’s downgrade of Ireland, it rallied to a high near 1.0640. Consolidating around the 1.0600 handle, this is where we open this morning as investors remain cautious of events in Europe, the US and China.

We expect a range today of 1.0510 – 1.0660

New Zealand Dollar: The New Zealand Dollar has fallen against all 16 of its major trading partners in the past 24 hours, as risk aversion once again took hold of the markets. Falling from yesterday’s open near 83 cents, the Kiwi fell almost 2 full cents to find support near 0.8110. Helped by an easing in the Greenback’s rally the New Zealand Dollar opens higher this morning at 0.8180, ahead of the local food price index due for release this morning. Despite food prices being amongst the most volatile, markets will still be paying attention to the figure for any insight into more major inflation figures. On the cross rates, we have seen the Aussie recover some recently lost ground and we open this morning at 1.2950 (0.7722).

We expect a range today of 0.8110 – 0.8220

Great British Pound: The British Pound has faltered overnight as inflation was reported to have eased in the United Kingdom. High inflation is what has been providing the Pound its much needed support, as this has kept speculation alive that the Bank of England will eventually be forced to raise interest rates. Still noticeably higher than other nations, the UK’s CPI figures came in at 4.2%, 0.3% lower than expected. This combined with a drop in the Retail Price Index and a larger than expected Trade Deficit sent Cable briefly below 1.5800, before the pair recovered its ground off the back of the FOMC minutes released across the Atlantic. Opening the this morning Sterling is trading at 1.5920 against the Greenback, 1.5040 against the Aussie and 1.9480 against the Kiwi.

We expect a range today of 1.4970 – 1.5100

Majors: The Bank of Japan kept interest rates on hold at near zero levels yesterday in an effort to assist in the economic recovery of the earthquake-devastated nation. In its accompanying rhetoric, Governor Masaaki Shirakawa gave a brighter assessment of the economy sourcing encouragement from a rebound in factory output and increasing signs from various sectors that the recovery is broadening. The Japanese Yen rallied hard against the Greenback, bringing the value of the Dollar to a low of 78.60 Yen. It also gained considerable ground against the troubled Euro and pushed the cross rate below 110.00 for the first time since March this year. Not being helped by its current situation, the 17-nation shared currency faced another downgrade last night as Moody’s cut Ireland’s sovereign debt rating. This move by one of the world’s three credit rating agencies has kept Europe’s perils in the spotlight and investor concern continues to highlight the risk of contagion spreading to Italy. Such investor concern has kept the safe-haven Dollar supported through the release of the FOMC minutes from the States overnight, where it became clear policy makers are divided as to whether or not to continue with further quantitative easing. If it is decided further monetary stimulus will be needed the decision will have an adverse effect on the Greenback. Opening this morning EUR/USD is trading off lows at 1.3965 and the USD/JPY pair is still below 80.00 at 79.00.

Data releases

AUD: Westpac Consumer Sentiment

NZD: FPI m/m

JPY: BOJ Monthly Report; Revised Industrial Production m/m

GBP: Claimant Count Change; Average Earnings Index 3m/y

EUR: Industrial Production m/m

USD: Import Prices m/m; Crude Oil Inventories; Federal Budget Balance

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