Overall trading has been insipid in the Asian session, a testimony to the lack of real drivers out there. And while we have seen some decent volatility in FX, pairs have not broken out of mid-term ranges. Interestingly, equity indexes continue to climb higher with S&P closing on the resistance at 1150, VIX safely below 20 and Crude prices steadily rising to $82.00bll. The Australian data was mixed with consumer confidence up 0.2% to 117.3, but owner occupied housing finance slipped -7.9% m/m vs -2.0% exp. The AUDUSD slipped on, with uninspired readings but was able to recovery as China's better than expected export-import data and bullish comments from RBA's Lowe, temporarily revitalized risk appetite. It will be interesting to see after the CNY revaluation hype wears off, if the AUD eroding interest yield differential is enough to keep the currency afloat. Interestingly, in New Zealand terms of trade index was up 5.7% q/q vs. 2.5% exp (largest gain since Q1 1976), which will only increase the focus on the RBNZ's meeting tonight. The RBNZ is unanimously expected to keep rates unchanged at 2.50% so the focus will be on the language in the MPS. The recent rash of soft economic data has increased speculation that the first hike will be in July and not June. However, with inflation expectations growing steadily there is the possibility that Governor Bollard keeps the phrase around mid 2010 and hint to a June or perhaps even April (long shot) start to the rate tightening cycle. The bills markets are completely unprepared for this type of event, with only 4bp of tightening priced in for April and 21bp through June. We believe that there is upside to the NZD, as the market is ill positioned for rate hikes, while the AUDs significant rate advantage is slowly eroding, making a short AUDNZD trade attractive. In recent days, the sterling has bore the brunt of risk reduction, political uncertainties, deficit concerns etc. Even a FT article which suggested that Barclay's was actively looking to purchase a US retail bank provided traders with enough reasons to short GBP. Today's UK Industrial Production will be critical, either providing the sterling with much needed support or refuel the QE debate and fuel further bearishness. While the risk on /off trade is as predictable as the weather, there is a growing bearishness today which has us looking for risk reduction trade within FX.