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Australian Dollar:  The Australian Dollar has held onto recent gains remarkably well as little relief came from the first of two scheduled meetings between the Euro-zone’s finance ministers. Announcing that the ECB’s balance sheet was not to be used as a source of funds meant the Aussie dropped 20 points lower on open this morning as investors continue to speculate how the fire-power of the European Financial Stability Fund will be increased. With many anticipating answers from the second summit scheduled for Wednesday, direction for the Aussie Dollar will remain largely in the hands of sentiment towards overseas developments. Locally we await PPI figures for the 3^rdquarter and as this can be a key risk event anything unexpected holds the ability to move the Aussie as does Chinese manufacturing PMI for this month. We do expect any gains to be limited in the short-term as we open this week at 1.0330 against the Greenback.
 
New Zealand Dollar:  The New Zealand Dollar closed the week on Friday as the worst performing currency over the previous 5 days. Failing to follow the pattern of other commodity currencies it finished the week lower against the US Dollar from one week previous, despite a sell-off of the Greenback in New York hours on Friday. Continuing unease over the Greek debt crisis and concerns for the impact of slowing global growth on the exporting nation capped any gains on Friday, a rally provoked by Greenback weakness topped out near 0.8030 and a move lower on open sees the Kiwi at 0.8015 this morning. Two key local events ahead this week after today’s bank holiday, the CPI release tomorrow and the RBNZ rate meeting on Thursday. Combined with EU meetings continuing this week we expect the New Zealand Dollar to remain volatile in the short-term.
 
Great British Pound: A greater than expected narrowing of the UK’s budget deficit helped the Great British Pound rally to 6-week highs against the Greenback on Friday. Trading around 1.5760 in the lead up to the event, Sterling pushed above 1.5800 before a sharp move higher later in the session saw the 1.5900 barrier also taken out. Eventual closing levels near 1.5970 have failed to hold as riskier currency gapped lower this morning following minor disappointment from the EU summit over the weekend. Cable currently trades at 1.5935 and the Pound buys 1.5400 Aussie dollars and 1.9860 against the Kiwi.
 
Majors: The Euro has gapped lower this morning after the first of two European Union summits was held on the weekend, the leader’s of all EU countries meeting to discuss the Greek debt crisis, recapitalisation of banks and increased capacity of the bailout fund. It was made known European leaders have ruled out increasing the ECB’s role in the recovery plan, confirming additional funds would not come from the deep pockets of the European Central Bank. The currency shared by 17 of its nations has dropped from end of week highs 1.3896 to open this week trading at 1.3847. The Greenback also dropped to post-World War lows against the Japanese Yen on Friday as speculation the US Federal Reserve may act further to ease monetary policy in the debt-stricken nation. Dropping to levels near 75.80 the drop was magnified by additional speculation the Bank of Japan will struggle to contain the appreciation of the Yen, and this morning the pair opens just back above 76.00 at 76.20. Markets are expected to remain volatile early this week as anticipation mounts toward the second EU summit scheduled for Wednesday.
 
Data releases
AUD: PPI q/q
NZD: Bank Holiday
JPY: Trade Balance
GBP: No data due for release
EUR: Flash Manufacturing PMI; Flash Services PMI; Industrial New Orders m/m
USD: No data due for release