Australian Dollar: The Australian Dollar fell dramatically during local trade yesterday as a combination of several factors (European Sovereign Debt; QLD floods and its impact on local growth and interest rates) prompted traders to sell the Aussie in favour of safer havens.

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During Australian time the dollar traded to a low of 0.9804 before trading between 0.9848 and 0.9964 in the European and US session as global equity markets and commodities advanced. Today see’s the release of the Employment Rate and Change in Employment with this release set to dictate AUD intraday direction.

We expect a range today of 0.9890 to 0.9990

New Zealand Dollar: With no data out overnight the Kiwi moved in tandem yesterday with the Australian Dollar falling during local trade. The Kiwi has been trapped in a 1 cent range of late (0.7550 to 0.7650) and it appears that this trend may continue for the remainder of the week with the currency really struggling to break through the 0.7650 level. The New Zealand Dollar is currently down against the Australian Dollar and is currently changing hands at 1.3050.

We expect a range today of 0.7560 to 0.7660

Great British Pound: The market is awaiting tonight’s Bank of England interest rate decision with little change expected in the general rhetoric expected. Some market participants have recently narrowed their bets that the Bank of England will potentially start hiking rates as early as third quarter 2011 and all will be looking at the MPC Rate Statement for some clues to confirm these rumours. The Pound gained considerably against the Greenback with it consolidating above 1.56 during European time before eventually hitting an intraday high of 1.5776 as global stock markets moved higher across the board. Against the AUD and NZD, the Pound Sterling is trading at 1.5830 and 2.0680 respectively.

We expect a range today of 1.5750 to 1.5950

Majors: The US Dollar fell against a basket of currencies as the European Sovereign Debt issue eased somewhat as European government’s considered aid for Portugal to quell the ongoing crisis. Adding to the EURO rally was a strong uptake in the Portuguese with both the 4 and 10 year bond auction being oversubscribed. The EURO broke through the 1.30 mark against the US Dollar on this news and basically just kept going eventually topping out at 1.3135. Stateside, the release of the Beige Book indicated that retail/consumer spending in November and December and a marked increase in manufacturing drove growth in the US. Despite this positive release, market participants sold the US and returned to riskier assets.

Data releases

AUD: Unemployment Rate

NZD: ANZ Commodity Prices m/m

JPY: Core Machinery Orders m/m; Prelim Machine Tool Orders y/y

GBP: Manufacturing Production m/m; Industrial Production m/m; Bank of England Official Bank Rate Decision

EUR: European Central Bank Official Cash rate Decision; French CPI m/m; German WPI m/m

USD: PPI m/m; Trade Balance; Unemployment Claims

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