Australian Dollar
After starting the week above 1.0200 erosion of investor confidence has caused the Australian Dollar to pare gains made last Friday, as markets re-evaluate the outcome of the recent EU summit. With major ratings agencies Moody’s and Fitch both expressing concerns for the actual effect of the new debt crisis plan, sentiment has quickly reversed, sending the Australian Dollar to lows approaching 1.0050.

Earlier in the day, local trade balance figures disappointed the local market as our trade surplus narrowed yet again, this time to 1.60 billion. As the RBA continue to preach a peak in the terms of trade this narrowing unsurprisingly also contributed to the downside pressure on the Aussie. Opening this morning at 1.0075 results of the NAB Business confidence survey are due to be published today, although in a week where the local calendar is relatively light overseas developments will continue to take centre stage.

We expect a range today of 0.9990 – 1.0100

New Zealand Dollar
The New Zealand dollar was lower against its U.S. counterpart on Monday after European leaders agreed to strengthen economic integration in the euro zone but failed to reassure markets on the handling of the region''s debt crisis. After beginning the week above 0.7750, closer scrutiny of Friday’s developments soon sent risk sentiment crumbling and the Kiwi fell to an eventual low of 0.7615.

Opening this morning slightly higher at 0.7630, in a week where the local economic calendar is relatively light, overseas developments will continue to dominate the Kiwi’s direction. On the cross rates, the New Zealand Dollar has lost a little ground against the Aussie although it still remains in recent ranges at 0.7580.

We expect a range today of 0.7570 – 0.7650

Great British Pound
A report published by economists at Standard Chartered bank predicted the economy in the UK would contract by 1.3% in 2012, in contrast to their previous growth prediction of 0.6%. Although Standard Chartered’s forecast in worse than the average economists’ predictions, it still played on investor’s nerves and sent the Pound Sterling south to lows below 1.5550.

Despite an attempt to pare earlier losses, the majority of gains proved unsustainable in the current risk-off environment and Cable opens this morning around 1.5580. Moving higher against its more risk-sensitive counterparts the GBP/AUD trades at 1.5470 and the GBP/NZD at 2.0420.

We expect a range today of 1.5380 – 1.5550

Majors
Foreign exchange markets began the week in a risk-off fashion as any optimism created from last week’s EU summit is slowly eroded away. Credit rating agency Moody’s came to bat overnight, saying it will review the ratings of European Union nations after plans released at the conclusion of the summit failed to produce decisive steps to end the debt crisis. Fitch also joined that party re-affirming Moody’s sentiment and highlighting nothing in the new plan will ease pressure on Europe’s sovereign bond ratings.

After opening on Monday morning around 1.3370 the Euro soon set about a one way move to the down side, taking out 1.3300 by early Europe hours and 1.3200 during the North American session. Finding support at 1.3170 yearly lows near 1.2880 are in sight if support around 1.3150 is broken. The Greenback, helped along by European woes and encouraging economic indicators of late, has remained in an upward channel and looks ahead to this evening’s FOMC statement for further direction. Aside from posting gains against the riskier classed currencies, it has also gained ground against the Japanese Yen, trading at 77.90 this morning.

Data releases:

AUD: NAB Business Confidence

NZD: FPI m/m

JPY: Tertiary Industry Activity m/m

GBP: CPI y/y; RPI y/y

EUR: German ZEW Economic Sentiment

USD: Retail Sales m/m; FOMC Statement; Business Inventories m/m; Federal Funds Rate