CURRENCY: Currency markets continue to hold their breath today as anticipation of US Federal Reserve and ECB action awaits. Low volumes and tight ranges may persist today with a slight NZD easing bias.

RATES: Kiwi rates are likely to open 1-2 bps lower today, consolidating after yesterday's sharp 8-10bps sell-off.

REVIEW

CURRENCY: Attempts on the topside yesterday failed miserably as market momentum turned quickly to a wait and see mentality. Overnight activity dried up with many happy to await the central bank outcome.

GLOBAL MARKETS: Markets were quiet overnight with low volumes and little by the way of data. Trading is likely to remain muted ahead of the Fed, ECB and payrolls later in the week. The Euro Stoxx added a further 1.7% overnight to be up 8.4% since Draghi's comments last week. Core bond markets showed signs of consolidation - perhaps a sign that the market is beginning to doubt whether the ECB will deliver anything more than sugar-pill solutions on Thursday - thus failing to stem the European debt crisis. German 10yr bonds yields were 2bps lower to 1.37% and US Treasury yields rallied 5bps to 1.50%. The EUR also consolidated - falling half a cent to 1.2250. In contrast, Spanish 10yr bonds continued their rally, with yields down a further 13bps to 6.53%. In other markets, corn prices were up 2.6% to fresh record highs, to be 61% higher than mid-June levels.

KEY THEMES AND VIEWS

THE CALM BEFORE THE STORM? Markets await Thursday's ECB meeting with keen anticipation - or trepidation. Hopes are high that the ECB will deliver a game changer to ring-fence Europe's periphery and go some ways to remedying the debt crisis. We remain skeptical - as were German officials overnight, reiterating that "Germany is opposed to euro bonds or other collectivized debt", despite espousing "full trust in the independent operations of the ECB". Merkel's coalition counterparts also voiced their objections to the proposed action. Draghi continues to rally support, meeting with US Treasury Secretary Geithner on Monday, having already garnered the support of key EU political leaders. Earlier, Geithner met with German Finance Minister Schaeuble, the pair backing the commitment from EU leaders to do everything to support the euro area, but urging the continuation of reform efforts. Draghi's proposal is thought to include EFSF and ECB purchases of peripheral European sovereign bonds in both primary and secondary markets. However, what Draghi cannot afford to do is disappoint markets or he risks the sovereign debt crisis escalating to a whole new level.

OTHER EVENTS AND QUOTES

� Italy auctioned ?4.7bn of 5 and 10 year bonds with yields down 55bps and 23bps respectively from the June auction (bid-cover of 1.34x).

� The troika will likely extend its visit to Greece until such a time that the government has finalised its two-year ?11.5bn austerity plan.

� The FOMC begins its two-day policy meeting tonight and speculation is rising that Bernanke may extend the guidance for keeping rates low beyond 2014, and/or cut the interest rate the Fed pays on bank reserves from 0.25% to zero.

NZD/USD: Cantering around?

The NZD remained within a tight range overnight frustrated with its inability to push back above 0.81USD. Similar trading today is likely with a test of support levels as market continue to wait for central bank guidance.

Expected range: 0.8050 - 0.8100

NZD/AUD: Difficult jump?

AUD moves have caught up with those of the NZD overnight and the two remain in a difficult race. Commentators should have difficulty in distinguishing between the two today as they move in tandem.

Expected range: 0.7692 - 0.7722

NZD/EUR: Stalled?

A brief look at levels above 0.66EUR did not sit well with this cross overnight. Today any further ventures above this level should experience similar difficulties as NZD selling intensifies.

Expected range: 0.6570 - 0.6610

NZD/JPY: In the stalls?

Further tight ranges for this cross given the inability to approach 64JPY yesterday with any conviction. Further dips below 63JPY should find buyers and ensure narrow range trading today.

Expected range: 62.95 - 63.55

NZD/GBP: Empty stand?

Little by way of volume or desire on this cross to take it from the tight range. NZD sellers on the topside may well lower their expectations closer to 0.5160 capping the topside today.

Expected range: 0.5120 - 0.5160