Australian Dollar:

The Australian Dollar opens a staggering two and half cents lower against its US Counterpart this morning following an evening of across the board selling. After initially tracking sideways for the majority of the local session yesterday the Aussie Dollar was sold to an overnight low of 1.0136 as investors retreated into safe-haven assets amid renewed concern that Italy, the world’s eight largest economy is coming closer to insolvency, following in the footsteps of Portugal, Ireland and Greece. With conditions throughout Europe likely to worsen in the short-term local equities are set for a bumpy ride this morning as the Aussie Dollar opens significantly lower at a rate of 1.0151. Looking ahead today volatilities are set to continue with unemployment data due for release at 11:30am

We expect a range today of 1.0020 – 1.0220

New Zealand Dollar:

It what can only be described as a mass sell-off overnight, financial markets around the globe got battered following news that Greece’s attempts to form a unified government are faltering as Italian bond yields closed at a Euro-Zone high of 7.25 percent. With fresh concerns now surfacing that the EU may not be to absorb the magnitude of an Italian bail-out, financial markets remain at a knifes edge given the increasingly political nature of the ongoing negotiations. Following a relatively subdued start to the Day the Kiwi was sold off overnight, reaching an overnight low of 0.7808 against its US Counterpart. Meanwhile this morning the Kiwi opens a full one and a half cents lower at a rate of 0.7818.

We expect a range today of 0.7780 – 0.7890

Great British Pound

The Great British Pound opens significantly lower against its US Counterpart this morning at a rate of 1.5924. With UK Stocks tumbling overnight fresh concerns surfaced that Europe’s debt crisis is set to worsen as Italian borrowing costs surged. Given the dangerous mix of high underlying debt and political uncertainty, fears of European debt Contagion remain a major threat as the Sterling traded to an overnight low of 1.5904. The Bank of England are due to meet this evening with the majority of economists predicting the underlying cash rate to remain unchanged at 0.5 percent. In what is usually a highly anticipated announcement, the near-term direction of the Sterling however is likely to be dictated by news flows out of Italy and Greece with financial markets becoming increasingly nervy. Meanwhile this morning the Sterling opens stronger against a substantially weaker Aussie at a rate of 1.5683

We expect a range today of 1.5590 – 1.5740

Majors:

In the biggest signal yet that Italy, the world’s eighth largest economy is battling insolvency, the Nation’s 10-year bond yield closed at a euro-area high of 7.25 percent overnight. With the S&P 500 losing 3.5 percent overnight and US Stocks tumbling, there remains a very real fear that Italy is now heading down a very similar path to that already taken by Ireland, Portugal and Greece. The question mark now remains as to whether Italy is too big save, given it does hold the world’s second largest bond market, external IMF intervention may be required as the European Financial Stability Facility worth 440-Billion EURO has already been sustainably tapped into as a result of other countries bailouts. In currency markets overnight there was no surprise to see the EURO being sold across the board as investors retreated into the Greenback which is recognised as the world’s reserve currency. After initially opening at a rate of 1.3832 the EURO was sold to reach an eventual low of 1.3522, opening this morning 3 US Cents lower at a rate of 1.3548. Meanwhile in the US, the Greenback rallied against the Japanese Yen trading as high as 77.877. Looking ahead for the rest of the week, Italy is likely to remain the major talking point with the market moving into dangerous territory given the sheer size of underlying debt levels and the significance of the Italian economy not only to the European Region but the broader global financial market.

Data releases

AUD: MI Inflation Expectations, RBA Assist Gov Lowe Speaks, Unemployment Change

NZD: RBNZ Financial Stability Report, Business NZ Manufacturing Index

JPY: Core Machinery Orders m/m, M2 Money Stock y/y

GBP: CB Leading Index, Asset Purchase Facility, Official Bank Rate

EUR: German Final CPI m/m, German WPI m/m, French Industrial Production m/m, Italian Industrial Production

USD: Trade Balance, Unemployment Claims, Import Prices, FOMC Member Evan Speaks, Fed Chairman Bernanke Speaks, FOMC Member Yellen Speaks, Federal Budget Balance