Australian Dollar
A smaller than expected expansion of the Chinese manufacturing sector caused share markets to slip during Asian hours and the Australian dollar lost 20 points on the initial release. The main focus for Wednesday, however, was the impending US session where the US Federal Reserve was due to conclude its two day monetary policy meeting and release its statement to the public. The hours leading up to the North American session were rather uneventful, although the absence of any indication QE3 is on the cards in the near future caused a Greenback rally that took the Aussie south from 1.0520 to 1.0450. Opening this morning only 10 points higher, local retail sales and trade figures will hold investors attention momentarily however tonight’s ECB meeting will hold the real key for direction of the Australian dollar into the end of the week.

We expect a range today of 1.0400 – 1.0550

New Zealand Dollar
As was the case for most of the Greenback’s counterparts last night, the New Zealand dollar came off second best following the FOMC meeting last night. Earlier in the day the Kiwi faltered slightly as Chinese manufacturing figures were softer than expected, however a later push towards 0.8140 was completely wiped out by the market’s reaction to no new stimulus measures indicated by US central bankers. Falling below previous lows, a bottom of 0.8070 was established and it is only just above here we open this morning. With all eyes on the ECB tonight, the NZD trades close to new highs formed again last night against the euro above 0.6615; ground has also been made against the Australian dollar with the pair at 1.2940 (0.7728) this morning.

We expect a range today of 0.8020 – 0.8150

Great British Pound
The run of bad news continued for the Pound last night, as Moody’s previous reduction in forecasted economic growth was backed up by a fall in output for the United Kingdom. Shrinking at its fastest pace in over three years, manufacturing PMI fell to 45.4 and the Pound subsequently dropped 40 points to 1.5640. The move south was to continue as focus moved over to North America, Greenback strength following the FOMC meeting took Cable to eventual lows of 1.5530 where we open this morning. Tonight is the Bank of England MPC meeting, which on a global perspective threatens to be overshadowed by the headlining ECB meeting, however an economy in its third consecutive quarter of contraction can’t help but look to its central bank for support. A rough 24 hours for the Pound has unsurprisingly left it lower on the antipodean crosses as well; the GBP/AUD starts today at 1.4850 and the GBP/NZD is out of the gates at 1.9220.

We expect a range today of 1.4780 – 1.4940

Majors
Markets were somewhat disappointed with what the Fed brought to the table last night; a pledge to keep interest rates at near zero until at least late 2014 as well as continuing its bond-swapping program “Operation Twist”.... in other words nothing new. There was clearly at least some expectation of quantitative easing priced in prior to the statement as share markets fell and the Greenback rallied after the fact. USD/JPY headed north for the first time in three days, peaking just shy of 78.50, and the euro dollar fell to support at 1.2220. Tonight the headline act for this week takes the stage, the ECB meeting will be closely watched to see if Mario Draghi follows through with his strong innuendos of further stimulus action made last Friday. An auction of 10-year Spanish bonds will also add to the volatility of tonight’s events as markets attempt to digest the results alongside potential intervention by the European Central bank.

Data releases:

AUD: Retail Sales m/m; Trade Balance

NZD: ANZ Commodity Prices m/m

JPY: Monetary Base y/y

GBP: Construction PMI; Official Bank Rate; MPC Rate Statement; Asset Purchase Facility

EUR: ECB Meeting; Spanish 10-y Bond Auction; Spanish Unemployment Change

USD: Unemployment Claims; Factory Orders m/m