Australian Dollar: As Europe takes a few small steps in the right direction the Australian Dollar manages to use the resultant risk rally to recover from monthly lows near 1.0100, touching levels of 1.0290 before close of markets. Earlier in the day we saw little movement in the Aussie as it remained range bound between 1.0130 and 1.0160, clearly showing it is heavily influenced by risk events out of Europe at the moment. Opening above the 1.03 handle this morning, ‘risk-on’ trade is present this morning and as the day progresses focus will remain with Europe as little in the way of fundamentals is scheduled for today.

We expect a range today of 1.0260 – 1.0370

New Zealand Dollar: The New Zealand Dollar spent most of the local session in range-bound trade on Friday, as markets remained on hold for the next development out of Europe. Moving between lows of 0.7755 and highs of 0.7785 it remained in this pattern through Europe and into North American hours. Some late political developments in Italy and Greece on Friday afternoon ignited risk appetite and the Kiwi rallied to highs of 0.7865 by close of markets. Opening slightly higher again this morning near 0.7875 the risk-on theme remains in play ahead of Retail Sales data due out this morning. For those watching the Kiwi-Aussie cross, risk sentiment has allowed a move higher for the Aussie and the pair trade this morning at 1.3095 (0.7636).

We expect a range today of 0.7820 – 1.7900

Great British Pound: The price of goods purchased by manufacturers dropped 0.8% in the month of October, hinting that the next release of CPI may potentially show that inflation is cooling. The British Pound dropped from 1.5940 to near 1.5900 on the news however focus on Europe ensured the impact was minimal. With a change of political leadership underway in both Greece and Italy and budget reforms a step closer, Sterling rallied towards the end of the week against the Greenback to 1.6070, but lost ground against the Euro (0.8555). Renewed risk appetite sees the Pound also weaker against the Aussie and Kiwi at 1.5630 and 2.0450 respectively.

We expect a range today of 1.5570 – 1.5720

Majors: The Euro posted its biggest gain against the Greenback in two weeks last Friday as news out of the debt-ridden continent soothed investor nerves. After Italian bond yields reached a troubling 7% earlier last week the country’s senate passed an austerity bill aimed at reducing Italy’s debt. Consequently, as promised, Silvio Berlusconi stepped down and a new Prime Minister was appointed in the form of Mario Monti. Moving east across the Mediterranean, the further indebted Greece also made political headway as they swore in Lucas Papademos as Prime Minister, replacing former PM George Papandreou. The Euro Dollar reacted positively to the developments rallying 200 points to intra-day highs of 1.3780. The Greenback, despite a better than expected consumer confidence index, finished the week lower against the riskier currencies and also slid against the Japanese Yen. We open this morning with the EUR/USD at 1.3790 and the USD/JPY at 77.20.

Data releases:

AUD: No data due for release

NZD: Core Retail Sales

JPY: Prelim GDP q/q; Revised Industrial Production m/m

GBP: No data due for release

EUR: Industrial Production m/m

USD: No data due for release