Australian Dollar:
The Aussie continues to remain under pressure on concerns that US fiscal cliff issues will drag on past Christmas. The AUD has held soft under 1.05 as demand was reduced yesterday following Wayne Swan''s announcement that the goal of returning the economy to surplus is unlikely to be achieved. While the announcement played on markets during our session it had very little influence in Northern Hemisphere trade as the overall effect to the Australian economy and our credit rating is likely to be small. The European session took the Aussie close to 1.05 but it failed to break it and eventually settled back towards 1.0465 following the headlines on the fiscal cliff in the US, there seemed to be a few buyers at these levels offering support and then some better than expected US data saw us edge back up towards the current open of 1.0485. No data out locally and mostly minor data out tonight will likely see us trade in a tight range today.

We expect a range today of 1.0445 – 1.0500

New Zealand Dollar:
The Kiwi fell further yesterday on the back if a poor GDP figure which came in less than economists’ forecasts. The result showed that last quarter the NZ economy only grew 0.2% compared to forecasts of 0.4% but was in line with the central bank’s estimate and while the figure was disappointing, a broader assessment still allows for a strong result in fourth quarter growth. On the back of this the NZD initially fell to 0.8335 but didn’t fall much lower than this even overnight with the US fiscal issues causing weakness across the board. NZD/JPY broke below 70 briefly yesterday but later recovered after the BOJ announced an increase in their asset purchases. This morning we have net migration and credit card spending but neither is likely to offer much direction as markets remain focused on US issues. This morning we find the NZD/USD at 83.40.

We expect a range today of 0.8315 – 0.8395

Great British Pound:
The pound has performed quite well in the last 24 hours having another attempt at 1.63 but failing to break through. Locally, retail sales came in below expectations showing a 0.1% increase versus forecasts of a 0.4%. This initially saw the cable dip back towards 1.6250 but it quickly recovered with several US data pieces printing better than expected. Range trading seems to be on the cards for the remainder of the day until the release of UK GDP with resistance at 1.6300 and support at 1.6250. Markets will remain held hostage by the US fiscal cliff talks with many investors wishing to remain on the sidelines for the time being. On the crosses this morning we find the pound stronger against both the AUD (1.5530) and the NZD (1.9525) after both had weaker sessions yesterday.

We expect a range today of 1.5500 – 1.5565

Majors:
Another day another headline about the US fiscal cliff, as we get closer to the cut off the noise is increasing and it is mostly drowning out all other news stories. Last night the focus was on a plan B proposal that Boehner, the Republican House Speaker, was putting to a vote in what is an attempt to put pressure on Obama and the Democrats. This is leading to the increasing divide between the two parties on the issue causing the markets to remain under pressure. The US data was mostly positive which may have provided some small amount of support through all of the negativity with US GDP revised up to 3.2%, a strong Philly Fed manufacturing number and a rise in existing home sales. Over in Europe consumer confidence was steady at -26.6 from -26.9 last month. On currency fronts the EUR is fairly flat having failed overnight to reach 1.3300 it is now trading close to where we left it yesterday at 1.3240. USD/JPY is marginally higher at 84.40 following Bank of Japan’s decision to expand the asset purchase program but overall there was not aggressive increase in monetary easing that the market was expecting.

Data releases:

AUD:
No data today

NZD:
Net migration flow, Credit card spending

JPY:
No data today

GBP:
Consumer confidence, GDP, Public Finances

EUR:
German consumer confidence

USD:
Uni Michigan confidence, Personal consumption expenditure