CURRENCY: The risks this week are large and in both directions. All things being equal there is demand for NZD, however the global situation (Europe (Spain & Greece), G20, any Central bank responses) will define the direction.

RATES: Kiwi Rates trading was quiet on Friday night. Despite the bias down in global rates overnight Friday, local rates are likely to open higher on BOE news, talk of a large IMF bailout fund, and a Greek election that so far is offering slightly higher odds of a market friendly outcome than last round.

REVIEW

CURRENCY: Last week was quiet, with price action suggesting that in the absence of global "risk off," there is underlying demand for NZD.

GLOBAL MARKETS: Despite a disappointing dataflow, Northern hemisphere markets were up on Friday on increasing hopes, following the BOE's easing moves, of a global policy response should turmoil ensue on financial markets. European equities closed solidly higher, and US indexes were also up. Sovereign bond yields retraced from their highs, with Italian 10-year bonds the biggest movers, down 21bps to 5.895%. US Treasury yields fell too. Commodities were a little mixed, but oil and gold were muted.

KEY THEMES AND VIEWS

D�J� VU: Here we are again, watching Greek election results come in. So far it appears New Democracy is well ahead, with which PASOK's ~12%, plus the bonus seats for the leading party, would in theory give enough votes for a bailout-supporting coalition (albeit one that wants to renegotiate some of its punitive terms). Such a result would leave Greece at the edge of the cliff, but likely soothe markets in the near term. However, latest news reports suggest that PASOK will refuse to join a coalition that doesn't include Syriza (who want to negate the terms of the current bailouts completely), and Syriza is ruling that joining. Another stalemate potentially beckons. Even if one could pick the outcome, picking the market response wouldn't be straightforward. There's been increasing evidence in the last week (particularly following the BOE's actions) of the "bad news is good news, as it will lead to policy stimulus" type of thinking that led to a series of damaging bubbles last decade. But those reacting this way do have a very good point - it is clear that some kind of nasty accident is going to be required to break down stoic German and ECB resistance to "big bazooka" style policies. "Good" news, such as a reprieve from bearish market sentiment, has tended to lead to more can-kicking. A "good" Greek result would at best lead to only a brief relief rally before the market simply turns around and focuses harder on Spain. Brace for ongoing volatility regardless.

OTHER EVENTS AND QUOTES

� The Bank of England unofficially announced a joint easing program with the Treasury. It involves a two-pronged approach: a "funding for lending" scheme that would provide funding to banks for an extended period at cheap rates (as long as they are lending it out), and secondly, auctions of Sterling liquidity with a maturity of six months, in tranches of no less than �5bn/month. Markets responded very positively to the move, as much for what it indicated about what might be in the pipeline from other central banks as for what it implies on its own.

NZD/USD: Ready?Steady?

The kiwi is considered a proxy for global risk and this week we have much that will define global sentiment. All things being equal we see demand for NZD, particularly if further liquidity is provided or suggested in the US.

Expected range: 0.7770 - 0.7950

NZD/AUD: NZD edges out AUD ?

The rates differential story is in focus and it tells a story that points higher for this cross. This cross should be relatively immune to global sentiment.

Expected range: 0.7785 - 0.7845

NZD/EUR: European stalemate?

Expecting volatility in this cross, and anything else would be guessing. Even if the Greek issue is resolved satisfactorily we still have Spain.

Expected range: 0.6100 - 0.6300

NZD/JPY: Key barometer

Will the safe haven be required, or will central bank actions see yield in demand? This question defines this cross. Don't forget the BOJ though, as they have a mandate to suppress excessive moves.

Expected range: 61.20 - 62.10

NZD/GBP: Is GBP the new Europe safe haven?

The BOE indicates further asset purchases are likely amid unconventional easing. This should weaken GBP, although there is thought that sterling is a European safe haven; hence it has seen demand.

Expected range: 0.4980 - 0.5075