Australian Dollar: Rumours of another potential cut in interest rates by the Reserve Bank of Australia on December 6 sent the Aussie in only one direction from yesterday’s opening levels, and that was down. According to a UBS survey markets are pricing in a 0.375% cut indicating increasing uncertainty clouding the Eurozone and sluggish global growth leaves many predicting either a 25 or 50 point reduction. After opening near 1.0340 the Australian Dollar slid to 1.0290 by the end of Asia and headed offshore only to be further pressured by the ongoing European debt saga. Eventually finding support at 1.0170 it has since bounced to touch 1.02 however some resistance lies just above at 1.0210. Short-term direction for the Aussie today will stem from the release of the minutes from the previous RBA monetary policy meeting; with interest rate rumours at the forefront its language will likely be scrutinised for any further hints.

We expect a range today of 1.0120 – 1.0250

New Zealand Dollar: The New Zealand Dollar has forged a steady path downwards as investor nerves towards Europe were heightened after a rise in Spanish and Italian bond yields. On Monday, local Core Retail Sales reported an impressive increase of 2.4% on the previous quarter giving the Kiwi a boost higher to 0.7920 although this was the high of the day. Sliding to 0.7870 by the end of the local session, flows towards safe-haven assets kept the downward trend in motion and an eventual low of 0.7770 was reached. Looking ahead there is little in the way of scheduled releases on the economic calendar for New Zealand today, although with a data heavy week surrounding Europe and the United States risk sentiment is likely to remain a significant driver of the kiwi. The Australian/Kiwi cross has spent the beginning of the week in a one-cent range and opens this morning at 1.3090.

We expect a range today of 0.7740 – 0.7830

Great British Pound: A survey by the Chartered Institute of Personnel and Development reported its gauge of U.K. hiring fell to minus 3 in the fourth quarter, from minus 1 the quarter previous. The British Pound fell a considerable 1% off the back of this news and with the ongoing issues of European debt it continued lower as general risk sentiment deteriorated. Finding support at 1.5890, Sterling opens this morning just above the 1.5900 handle ahead of some key releases this evening. CPI is scheduled alongside the accompanying Bank of England Inflation Letter and the Retail Price Index. A combination of risk aversion and poor UK data has seen the Aussie and Kiwi crosses in sideways trade, the Pound buying A$1.558 and NZ$2.039.

We expect a range today of 1.5480 – 1.5670

Majors: The Euro Dollar has tumbled from opening levels near 1.3800 yesterday after the cost of borrowing rises for both Italy and Spain. An auction of Italian 5-year bonds saw the yield rise to 6.29% which is the highest yield since June 1997; the 10-year notes also rose a quarter of a percent to 6.70 after reaching 7.48% late last week. In combination with Spanish bond yields also rising what this means is the markets are deeming borrowing from these countries riskier and riskier, governments may at a certain level deem the cost of borrowing too high and turn to the EU for a bailout, just as Greece, Ireland and Portugal have done in the past. Fears of such contagion sent the region’s currency a full two cents lower before it found support at 1.3600. Safe-haven flows have also seen the Japanese Yen strengthen against the Greenback, moving defiantly against the threat of intervention to fall momentarily below 77.00. Helping the Yen’s gains was a smaller than expected price deflation of GDP-based goods and services, as well better than predicted Industrial Production. The pair opens this morning at 77.10.

Data releases:

AUD: Monetary Policy Meeting Minutes

NZD: No data due for release

JPY: No data due for release

GBP: CPI y/y; RPI y/y; BOE Inflation Letter

EUR: German & French Prelim GDP q/q; Flash GDP q/q; German ZEW Economic Sentiment; Trade Balance

USD: Retail Sales m/m; PPI m/m; Empire State Manufacturing Index