Australian Dollar:
Another fairly quiet session as we begin to see volatility flatten and ranges harden heading into the Christmas period. The Aussie underperformed compared to most of its counterparts yesterday which was surprising given the positivity in regards to fiscal cliff talks in the US. It seemed investors had put the focus on reduced growth targets from China and somewhat negative comments from Governor Stevens yesterday and used this as an excuse to keep the AUD softer in a range between 1.05 and 1.0530. With EUR doing well on the back of a Greece credit upgrade and improved German business confidence we have seen the EUR/AUD reaching levels not seen since October, trading just above 1.2670. Overnight the AUD was unable to hold onto the 1.05 level but it didn’t fall far below it and is currently at 1.0490. Meanwhile today is shaping up to be a fairly quiet day data wise with only the RBA bulletin and foreign exchange transactions reports due out locally.

We expect a range today of 1.0475 – 1.0535

New Zealand Dollar:
Yesterday we saw the Kiwi give up 0.84 against the USD after capturing it a week ago, the move lower was initially on the back of weakening growth outlook from China but was accelerated by a poor result in the local current account deficit. Heading into the European trade we were kept capped below 0.84 and followed other commodity currencies down further eventually reaching a low close to 0.8350 overnight mostly on the back of some negative comments from Obama. It seems the last 24 hours of losses has been in part due to flows into the Euro and also some profit taking after strong moves up over recent weeks. Meanwhile this week’s big data release; NZ GDP, is due out shortly which economists are forecasting to come in at 2.5% for the year. This morning we find the currency currently trading at 0.8365.

We expect a range today of 0.8345 – 0.8435

Great British Pound:
With the bank of England being one of the only major banks that doesn’t release comments at the time of their rate announcements, the BOE minutes in generally watched much more closely than other central bank minutes. Last night was no different as the release caused the cable to reach a high not seen since September 21 just above 1.6300. The minutes showed that all but one of the nine members were against an extension to the asset purchase program and made reference to weak growth but increasing inflation which was a more hawkish result than the market expected. The pound was not able to hold onto its gains though and eventually drifted lower to where we find it this morning at 1.6255, tonight we have retail sales but it is likely most direction will come from the Bank of Japan later today. This morning the pound is also stronger against the AUD (1.5490) and the NZD (1.9430).

We expect a range today of 1.5450 – 1.5530

Majors:
 The strength in EUR continued for most of the Asian session yesterday having gained earlier following S&P’s credit upgrade of Greece. The shared currency also enjoyed the bulk of optimism in the market which was gained from the progress in talks regarding the US fiscal cliff and the prospect of further easing by the BOJ. Heading into Northern Hemisphere trade the Euro’s strength was further bolstered by much better than expected German business confidence which came in at 102.4 from last month’s reading of 101.4. This saw the Euro eventually reach a high around the 1.33 level against its US counterpart and strengthened further against the Yen approaching 112.50. Over in the US last night there were continued developments on the fiscal cliff with Obama stating he wants the whole thing wrapped up before Christmas even as Republicans waste time and posture on the proposals. Meanwhile today markets await the BOJ announcement on whether they will further ease monetary policy and then tonight we have a large amount of US data due out with the main focus being on GDP.

Data releases:

AUD:
RBA December minutes, Conference board leading index

NZD:
GDP, ANZ business confidence

JPY:
Convenience store sales

GBP:
Retail sales

EUR:
German PPI, French PMI, Consumer confidence

USD:
GDP, Initial jobless claims, Existing home sales, Philadelphia Fed.

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