Australian Dollar: The Aussie dollar pulled back from its early morning highs around 68 cents to find an intraday low at 0.6675 in Asia yesterday before entering the offshore session at 0.6715. The selling began following the worst business confidence data in twelve years as measured by the National Australia Bank in its monthly index with the negative sentiment spilling over into equity markets. The AUD/USD held up well during European trade as offshore markets keenly anticipated the developments in the U.S and whether or not the new administration could gain support for the massive stimulus package it was proposing. Following the commencement of testimonies by key U.S officials the AUD initially spiked to 0.6740 however the move was short lived as investors remained sceptical that the plan would get through smashing equities and the Aussie dollar alike. This morning sees the local unit open at 0.6505 ahead of December Housing Finance data in what is expected to be an extremely whippy days trading.

- We expect a range today in the AUD/USD rate of 0.6450 to 0.6650

:: Great Britain Pound: The Pound Sterling was mixed in early London trade, pulling back from early highs near 1.4900 to trade at 1.4750 only to bounce back to 1.4840 following several U.K economic data releases. The RICS House price balance survey declined from 70% to 76% whilst the U.K Trade Deficit narrowed more than expected to 7.4 billion GBP in December, the smallest deficit since June 2007 helped in part by the extremely weak level of the Cable. In U.S trade the Sterling capitulated to reach a low in late trade near 1.4450 as markets were disappointed that the U.S stimulus package is yet to be decided as had been anticipated. Despite the large falls in the GBP/USD the GBP/AUD cross rate bounced back from its lows near 2.1800 after a massive sell off in the Aussie dollar to open near its highs at 2.2275.

- We expect a range today in the GBP/AUD rate of 2.2100 to 2.2400

:: New Zealand Dollar: The Kiwi managed to hold on to support at 53 cents in Asia yesterday following an aggressive selloff during the morning session. Early offshore trade saw it jump back towards 54 cents however resistance capped any further advances ahead of the U.S open. A massive drop on North American equity markets spurred a round of selling which saw NZD/USD collapse 4% to a low of 0.5180 with this mornings open only marginally higher at 0.5190. NZD/JPY also lost ground plummeting from 49.20 to 46.70 as risk aversion re-emerged and is likely to continue to dominate the markets focus in the near term.

- We expect a range today in the NZD/USD rate of 0.5120 to 0.5280

:: Majors: News in financial markets overnight was dominated by the debate in U.S parliament surrounding the extra stimulus package and the merits of the proposal. With Fed Chairman Bernanke and new Treasury Secretary Geithner testifying to separate committee's at the time of writing equity markets in the U.S had plummeted by 4.5% triggering a massive flight to safety. After scrapping the so called bad bank model investors remained sceptical that the new treasurer would gain enough support for his proposed two trillion dollar package with the reaction on currency markets sending EUR/JPY 3% lower from 119.50 to a low of 115.75. EUR/USD and USD/JPY both traded lower as a result to open this morning near their lows at 1.2870 and 90.20 respectively. With the debate continuing into the early hours of Sydney trade extreme volatility is expected today as the outcome of the governments proposal is decided. In a direct line Geithner seemed to sum the situation up well by stating that this strategy will cost money, involve risk, and take time.

:: Data Releases:

• AUD: Dec Housing Finance

• NZD: Jan Business PMI

• USD: Dec Trade Balance

• GBP: Dec Employment & BoE Inflation Report

• EUR: German CPI

• JPY: No Data Expected today

• CAD: No Data Expected today