Australian Dollar
Risk was back on the table yesterday and the Australian Dollar rallied higher along with other commodity linked currencies. After starting the day trading just above 1.0300, the Aussie soon set forth on a rally towards 1.0400 after it was announced Chinese economic growth was higher than anticipated in the 4th Quarter of 2011. With China being Australia’s biggest trading partner, continuing growth in the emerging economy bodes well for Aussie exports and positive sentiment saw the local unit move towards 1.0390 initially, eventually hitting highs near 1.0440. Risk sentiment remained positive offshore thanks to economic sentiment in Germany and better than expected bond auctions in Spain and Greece, although positive manufacturing statistics from the US gave the Greenback a boost more so than risk sentiment in general. Trailing lower, the Australian Dollar opens this morning at 1.0360 ahead of Westpac’s Consumer Sentiment survey due for release this morning.

We expect a range today of 1.0330 – 1.0420

New Zealand Dollar
The New Zealand Dollar has been one of the strongest performing currencies over the past twenty four hours after better than expected Chinese data boosted sentiment yesterday afternoon. The Kiwi embarked on a solid move higher after it was announced the Chinese economy grew more than expected in the final quarter last year, reaching highs close to 0.7990 by the end of the local session. Heading offshore, risk sentiment remained positive throughout Europe and the NZD/USD hit highs above 0.8025. Unable to hold these gains it has slid back to earlier levels of 0.7990 against the Greenback ahead of a quiet day on the local calendar. Opening unchanged against its Australian counter-part, the Kiwi did lose some ground earlier in the day to 0.7680 before reclaiming loses to trade this morning at 0.7710.

We expect a range today of 0.7960 – 0.8030

Great British Pound
The Great British Pound has fallen against the Euro and has seen limited gains against the Greenback after annual inflation was shown to have fallen from 4.8% to 4.2% overnight. This weaker inflation number has heightened speculation the Bank of England may be convinced to loosen monetary policy further by expanding its quantitative-easing program. Sterling still managed to rally to 1.5400 against the US Dollar after bond auctions in Spain and Greece boosted risk sentiment, however it fell to lows of 1.2020 against the Euro as a result. Against the antipodean currencies Sterling is lower against the Aussie at 1.4770 and Kiwi at 1.9170, ahead of unemployment data from the UK this evening.

We expect a range today of 1.4710 – 1.4850

Majors
The Euro Dollar has gained ground against its US counterpart for the first time in three days after economic sentiment in Germany posted its biggest gain in the two-decade history of the index. The ZEW survey showed a gain of 32.2 points to minus 21.6 and the shared currency rallied to 1.2800 after pushing higher earlier in the day as a result of better than expected growth in China. Gaining momentum also from a fall in Spanish and Greek borrowing costs as well as an oversubscribed auction for the EFSF, investor concerns were soothed relating to the ability of European countries and the stability fund to raise debt. Unable to hold onto all of these gains, the Greenback reclaimed some lost ground as it was helped along by a much better than expected reading for manufacturing levels in the New York region. Stabilising around the 1.2730 mark it is here we open this morning with the Japanese Yen also paring daily gains after the New-York based manufacturing report. The safe-haven pair trade back around 76.80 ahead of the Producer Price Index report and Long-Term asset purchases from the US this evening.

Data releases:

AUD: Westpac Consumer Sentiment

NZD: No data due for release

JPY: Revised Industrial Production m/m

GBP: Claimant Count Change; Unemployment Rate

EUR: Italian Trade Balance

USD: PPI m/m; TIC Long-Term Purchases; Industrial Production m/m