Risk appetite saw slight erosion in the Asian session, with the USD as the principal gainer. Equity markets across the region were weaker, with the Hang Seng down -1.66%. The heavy tone was not helped by New Zealand, which saw a jump in unemployment data from 6.5% to 7.3% (a 10yr high). Pre-data, markets had been aggressively pricing in RBNZ rate hikes as early as April, but these worrying numbers severely dent this argument. On the figures, the NZDUSD gapped down to 0.7005, paused briefly, and then took another leg down to 0.6960 (triggering stops below 0.7000). On a more positive note, Australian Retail Sales ex-inflation data for Q4 were slightly stronger, rising 1.1% q/q while building approvals data were also significantly higher, up 2.2% m/m. The retail sales figures suggest that even with the withdrawal of government fiscal stimulus GDP growth in Q4 remains resilient. As we have stated numerous times since the surprise RBA rate decision, we believe the central bank is underestimating the positive momentum in the Australian economy and will be forced to raise rates in March. Tomorrow, the usually dull MPS should provide greater insight into the RBAs thinking. And should the RBA raise its expectations for growth and inflation tomorrow, it will clearly create questions on which of the external factors cited (China, sovereign credit and domestic bank lending) worries the central bank the greatest concern. And also re-instates the market belief in a March hike. In this environment, we believe the AUD should outperform. Yesterday the European Commission approved Greece's fiscal consolidation strategy, however gauging from the reaction in EURUSD and CDS spread the markets (nor are we) were not overly convinced / fooled. In the report, the EC has given Greece until the end of 2012 to trim to budget deficit to below 3.0% of GDP which we see as very optimistic. Since the press conference, the EURUSD has fallen to 1.3835, while Greek CDS spreads continued to widen. But what is even more concerning was the reaction in Portugal and Spain's CDS spreads which suffered significantly. The move was reminiscing of early Greek price action and quickly fueled contagion speculation. Due to yesterday's response, we believe the post ECB press conference could contain some serious fireworks. Journalist armed with plenty of details (supplied by the EC assessment) won't let Trichet just get away with a simple absurd hypothesis and generic dismissal of any ECB role in a potential bailout. We see significant event risk around this press conference, with the EURUSD risk skewed to the downside. For a complete analysis of today's central bank meeting please see the ACM Central Bank Preview