Daily Forex Commentary December 31

- We expect a range today in the AUD/USD rate of 0.6845 to 0.6945

:: Great Britain Pound: The Pound Sterling peaked at an overnight high of 1.4770 in early London exchange before commencing a steady decline throughout the remainder of the offshore session, drifting to an eventual low of 1.4450 its lowest level since April 2002. With Oil prices experiencing extreme volatility and the USD initially weakening, then strengthening overnight the Pound was unable to hold on to its early gains as it was sold off aggressively against all the crosses, in particular the Euro which is fast approaching parity having exchanged as low as 1.02. Against the Aussie dollar the GBP hit an overnight low of 2.0950 and opens this morning at 2.1110 whilst in trade with the Kiwi it opens at 2.5130.

- We expect a range today in the GBP/AUD rate of 2.1000 to 2.1200

:: New Zealand Dollar: The Kiwi tracked a similar path to its trans Tasman neighbour the Aussie dollar overnight, initially trading higher only to run into some stiff resistance and retreat back to Asian closing levels. After posting a high of 0.5855 in late European trade the NZD opens this morning back at 0.5770 amidst a return to volatility inspired by Middle East Tension and gyrating Oil prices. Risk aversion reared its head again with all Yen related crosses falling, in particular NZD/JPY which shed almost 2% from its overnight highs. Against the Aussie dollar the Kiwi opens slightly weaker at 0.8400 after having recovered from a earlier dip to 0.8375.

- We expect a range today in the NZD/USD rate of 0.5725 to 0.5825

:: Majors: Volatility returned overnight as escalating tensions in the Middle East triggered a jump in oil prices. The Euro initially gained ground against the other major currencies with EUR/USD posting an offshore session high of 1.4360, up from the Asian close of 1.4155. While the Euro was grinding out gains the big dollar fell to a low of 89.75 against the Japanese Yen before bouncing back to settle above the 90 mark in late U.S trade. The Euro gave back all of its gains to open this morning back at 1.4070 with Light Crude oil prices pulling back from their highs above $42 to settle back below $39 a barrel on NYMEX. Also weighing on the dollar was media coverage of what appears to be the worse Christmas period for retailers in the U.S in 40 years. In a definitive sign of a lack of confidence for the outlook in 2009 EUR/JPY cross rate plummeted 2.5% from its overnight highs of 129.70 to reach a low of 126.50.

:: Data Releases:

* AUD: No data expected today

* NZD: Nov M3 Money Supply

* USD: Dec Chicago Purchasing Manager & Dec Consumer Confidence

* GBP: No data expected today