Australian Dollar: The Australian Dollar has opened under pressure this morning as markets react to yet another headline. US ratings agency Fitch has come out to say any Euro zone contagion poses a threat to US banks; although this is nothing new or unknown the negative sentiment has sent the Australian dollar down from previous levels above 1.0160 to 1.0090.

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A quiet day on the economic calendar yesterday provided little relief against the ongoing risk aversion and despite unsure and volatile trade the overall trend remains in place to the downside. Markets will be watching key levels around 1.0050/60 today because a break below this leaves the Australian Dollar vulnerable unless sentiment improves. Early this morning investors will be watching RBA Governor Glenn Stevens as he is due to speak at the Institute of Internal Auditors Financial Services Forum, although there are no scheduled economic releases for today.

We expect a range today of 1.0040 – 1.0140

New Zealand Dollar: Ongoing uncertainty and continual swings in market sentiment has seen the New Zealand Dollar lose ground against the Greenback early on yesterday however trade since in a volatile range between 0.7625 and 0.7715. Finding support at the bottom of this range represents a 6-week low and a break below these levels could lead to a potential move lower. Opening this morning at 0.7645 the immediate focus will be on Producer Price Index figures where markets are expecting a 0.6% increase in the prices of goods and raw materials purchased by manufacturers, down from the previous increase of 0.9%. Against the Australian Dollar, losses from earlier this week have been consolidated and the pair remains at similar levels to yesterday trading at 1.3180 (0.7587).

We expect a range today of 0.7610 – 0.7710

Great British Pound: The Great British Pound has continued its slide against the Greenback after the Bank of England announced it expects inflation to fall sharply over the next two years. Mervyn King, in the central bank’s monthly inflation report, said outlook for growth in the United Kingdom has worsened in light of the situation in Europe and it is more likely we will see inflation below the 2% target than above in two years time. Falling to 1.5740 by the end of the European session, it staged a brief rally back towards 1.5800 however a bout of risk aversion sees it even lower this morning at 1.5725. With risk off the table the Pound has rallied to just shy of 1.5600 against the Aussie and 2.0580 against the Kiwi.

We expect a range today of 1.5500 – 1.5660

Majors: The Euro has found support on the downside for the time being after slipping through last week’s lows of 1.3500. Demand to buy the Euro around 1.3430 has kept the shared currency supported as concerns for Europe’s economic and political situations continue. Volatile trade ensued overnight as Mario Monti appointed his new cabinet, a cabinet devoid of any elected politicians, which has sent a warning signal to the markets. Realising no politicians are willing or wanting to implement the required austerity measures the Euro was sold off, helped along by rumours the ECB may be forced to buy more European bonds to boost waning confidence in the region. Earlier in the day the Bank of Japan concluded their 2-day monetary policy meeting in which they announced no changes to current policy; no impending threat of an another intervention emerging just yet as the USD/JPY trades just below 77.00. Looking ahead to this evening, focus may shift slightly back to the US economy as some key data is due for release, indicators for the health of housing, employment and manufacturing. With risk still off the table this morning the EUR/USD trades at 1.3480.

Data releases:

AUD: No data due for release

NZD: PPI Input q/q; PPI Output q/q

JPY: BOJ Monthly Report

GBP: Retail Sales m/m; Nationwide Consumer Confidence

EUR: No data due for release

USD: Building Permits; Unemployment Claims; Philly Fed Manufacturing Index