CURRENCY: Further extremely tight ranges in the currency markets are likely again today. A minor positive bias remains for the NZD however getting back into the 0.80USD territory should be too tough again today.

RATES: Kiwi rates are expected to open with some pressure to the downside in light of global moves. Q2 CPI at 10.45am will be the key focus on the day.

REVIEW

CURRENCY: A moribund FX market, assisted by the absence of the Japanese, found itself going nowhere overnight. Even the minor downgrade to global growth forecasts by the IMF failed to ignite any larges moves.

GLOBAL MARKETS: Markets were largely range-bound in the London session, before poor US retail sales saw a return in the now familiar "grinding risk-off" trading pattern. US retail sales data fell 0.5% in June, the third consecutive decline in as many months. Equities were mixed to lower on the day while government bond yields rallied to within a few basis points of all-time lows across core markets. Yields on US 10-year bond were 2bps lower to 1.47% heading into the close. German 10-year yields fell 3bps to 1.23%, while European peripheral bond yields increased on the risk-off move (Spain +16bps to 6.73% and Italy +5bps to 6.08%). Commodity prices finished higher with corn adding a further 4.5% to be 52% higher than a month ago.

KEY THEMES AND VIEWS

NO RESPITE IN THE US DATAFLOW: US advanced retail sales data was significantly below expectations in June, falling 0.5%m/m (+0.2% exp.). This was the third negative outturn in as many months, and implies retail sales fell by 1.2% on the quarter - not a good omen for Q2 GDP. As the job market cools, consumers look to again be cautious in their spending habits.

GOVERNMENT BOND YIELDS FALL TO FRESH LOWS: The deteriorating global growth outlook has seen investors batten down the hatches ahead of the summer recess. Given the plethora of downside risks, investors seem to be placing more value on a return of their money than a return on their money. Core 10-year government bond yields in the US, Germany and Japan are all back to within a few bps of all-time lows. German 2-year yields hit a record low of -0.06% suggesting investors are prepared to pay the government to safeguard their money. The poor run of US data is potentially buoying expectations of additional Fed easing, and markets will listen intently to tonight's testimony from Bernanke before the Senate Banking Committee.

NZ Q2 CPI: ANZ expects a quarterly increase in CPI of 0.5% (in line with the market consensus) with risks to the upside given the level of uncertainty surrounding our tradable inflation pick of 0.4%; we make the key judgment that soft demand and a high NZD will continue to exert downward pressure on tradable inflation. A headline figure of 0.7% or above could elicit some paring back in rate cut expectations.

OTHER EVENTS AND QUOTES

� NY Empire State Manufacturing Survey improved to +7.4 in July from +2.2 in June, boding well for a mild tick-up in other regional surveys.

� The IMF downgraded its 2013 global growth forecast to 3.9% from 4.1%. Of note, Spain's GDP forecast was cut 0.7ppts to -1.5%.

NZD/USD: Waiting mode?

Despite the release of the NZ Q2 CPI today little action is expected outside of recent ranges for the NZD. While the slight upside bias remains getting back above 0.80USD will require an elevated CPI release which is not expected.

Expected range: 0.7938- 0.7998

NZD/AUD: Locked in?

Marginal further weakness is possible on this cross with the release of the RBA July meeting minutes this afternoon. Support around d0.7742 may be reached if a weaker inflation result is delivered locally.

Expected range: 0.7755 - 0.7805

NZD/EUR: Having a hard time?

Further investigations of support levels for the EUR meant weak attempts on the topside for this cross. Having reversed this move today's activity will again be confined within a tight familiar range.

Expected range: 0.6480 - 0.6520

NZD/JPY: Still searching?

The absence of the Japanese market yesterday has delivered a deeper dip on this cross. Support under 62.50 was enough to hold the base which should remain in place today.

Expected range: 62.50 - 63.25

NZD/GBP: Holding comfortably?

While support around 0.5080 has not been tested overnight this cross remains close to it. The release of the Bank of England July meeting minutes on Wednesday evening may cushion the move lower towards 0.5050.

Expected range: 0.5080 - 0.5120