Australian Dollar:
Last week saw big moves in the Aussie as we reached highs above 1.0570 earlier in the week on hopes a deal would be done early to solve the fiscal cliff, as the week wore on and hopes dropped so too did the risk correlated AUD. On Friday night investors pulled out of the few remaining bets that the US government would provide a solution to fiscal cliff issues before a couple days off and we saw the Aussie pull back towards 1.0400. As expected this level managed to provide some support and we managed to hold on till close on Friday. Unfortunately this morning the level could not be held and we opened just below it at 1.0395, with liquidity starting to dry up and little in the way of data the Aussie will likely just follow risk flows through US budgetary developments.

We expect a range today of 1.0350 – 1.0435

New Zealand Dollar:
The Kiwi’s move south continued on Friday night as investors pulled back on earlier hopes US politicians would agree to a fiscal solution before the Christmas break. After reaching yearly highs earlier in the week above 0.8450 the end of week sell off has seen us reach this morning’s open more than 2 cents lower at 0.8235. Weakness seems likely to continue for the next few days with little in way of data to offer much support and much of the liquidity in the market drying up; sentiment could see the Kiwi drift lower as any remaining positions are squared away today.

We expect a range today of 0.8185 – 0.8295

Great British Pound:
The pound opens this morning noticeably lower at 1.6170 after a poor night of Friday mostly on the back of risk flows out of GBP into the USD following disappointment in US fiscal developments. Local data also didn’t do any favours for the sterling with UK GDP revised down to 0.9% from 1% for the previous quarter. Prior to Friday night’s sell off the pound had outperformed most of its counterparts last week, touching 1.6300 against the USD for the first time since September and also reaching 2 month highs against NZD and AUD. The GBP has also generally held up a bit better on fiscal cliff disappointments compared to the so called commodity currencies (which includes AUD and NZD) and this morning we find GBP/AUD at 1.5540 and GBP/NZD at 1.9620. The week ahead is set to be fairly quiet with a preference to the downside until discussions reopen in the US after the Christmas break.

We expect a range today of 1.5510 – 1.5595

Majors:
While the market was generally expecting the US politicians to wait till the last minute to sort out the fiscal cliff there was still a glimmer of hope last week amongst investors that it may be sorted before Christmas. With the Republicans giving up on their vote on a new proposal on Friday and the accompanying political posturing by both sides; any hope of an early resolution appears to have come to an end. With this in mind, any investor looking to step away from the market for a few days break was forced to pull back on any risk based positions and as such we have seen strength in the USD and JPY and likewise weakness in EUR and the commodity currencies. Today we find the Euro opening noticeably lower at 1.3180 while USD/JPY is marginally higher at 84.35. The week ahead we really only have tier 2 data until markets come back temporarily on Thursday and Friday and even then we will likely take most of the direction from comments by US politicians.

Data releases:

AUD:
No data today

NZD:
Money supply

JPY:
Supermarket sales

GBP:
Home track housing

EUR:
German import price

USD:
No data today