Australian Dollar: The Australian Dollar climbed another rung on the ladder yesterday, finding support in local growth figures despite a currency market that is on hold ahead of key meetings in Europe today and tomorrow. Gross Domestic Product for the September quarter registered 1% growth from the previous quarter, however this translated into an annualised rate of 2.5%; higher than the 1.9% registered in June and also market expectations. Gaining around 35 points initially the Aussie continued higher as trade moved into offshore hours reaching highs near but short of solid resistance at 1.0300. The ongoing threat of a ratings downgrade by S&P and investor nervousness sent the Australian Dollar back to earlier levels around 1.0240 although it resilience shone through and we are back testing barriers at 1.0300 this morning. With unemployment data due for release this morning and events set to kick off in Europe we may finally see the Aussie break either side of its current range; however in which direction we are yet to know.

We expect a range today of 1.0220 – 1.0350

New Zealand Dollar: The New Zealand Dollar remains in its 75 pip range this morning, having not ventures outside of 0.7750-0.7825 for most of December. With no new developments locally yesterday the pair was subject to the ebbs and flows of risk sentiment, however as markets remain hesitant to take a position ahead of two key European meetings today and tomorrow the Kiwi opened onshore trade only slightly lower at 0.7770. Up with the rooster this morning the RBNZ held its monthly interest rate meeting where they announced at its conclusion the benchmark rate was to remain unchanged at 2.5%. The RBNZ also announced that although the domestic demand is growing in a moderate pace, minor fluctuation in the NZ dollar is providing some support to the nation''s trade. Rallying off the back of this the Kiwi touched 0.7800 against the Greenback and will look to Europe this evening for further direction. Recent strength in the Aussie earlier saw the cross rate move above 1.3200 (0.7576) for the first time since May however the RBNZ meeting helped the Kiwi push it back to 1.3190 (0.7582).

We expect a range today of 0.7740 – 0.7840

Great British Pound: The Great British Pound put in an impressive rally during the North American session as anticipation surrounded the publishing of the UK’s GDP estimate. The NIESR report showed a growth of 0.3% over the last 3 months as the previous quarter was revised from 0.5% to 0.4%. After rallying to highs near 1.5720, Sterling retraced nearly 50 pips before stoically moving back above 1.57 against the US Dollar. Opening at 1.5710 this morning market participants will be watching keenly the accompanying rhetoric produced by the Bank of England following its monthly meeting this evening, as well as any developments from Europe. On the cross rates, the Pound is higher against the Aussie and the Kiwi, at 1.5260 and 2.0150 respectively.

We expect a range today of 1.5170 – 1.5320

Majors: The foreign exchange markets are currently in a holding pattern with the majors reacting marginally to ad hoc statements although ultimately refusing to stray too far away from recent ranges ahead of key meetings this week. Since falling from levels above 1.3500 in early December the Euro Dollar settled around 1.3400 and has not moved more than 60 points either side of this since. Keeping true to this the 17-nation currency rallied earlier in the day touching 1.3450, as world equity markets remain somewhat supported and optimism increased for a positive outcome from this week’s EU summit. However when a German government official said the nation rejects proposals to combine current and permanent euro-area rescue funds, and S&P said it may cut the European Unions’ credit rating along with several of Europe’s major banks, the Euro dropped back to a low of 1.3350. With the ECB monetary policy meeting scheduled this evening and the much anticipated summit in Brussels the Euro may possible break free of current ranges although in which direction is anyone’s call at this stage.

Data releases:

AUD: Employment Change; Unemployment Rate

NZD: Official Cash Rate; RBNZ Rate Statement

JPY: Core Machinery Orders m/m; Current Account

GBP: Official Bank Rate; Asset Purchase Facility; MPC Rate Statement

EUR: Minimum Bid Rate; ECB Press Conference

USD: Unemployment Claims; Treasury Currency Repo