CURRENCY: The positive bias is waning for the NZD after a failed attempt on 0.80USD yesterday. US Federal Reserve Chairman Bernanke's reluctance to commit to QEIII and the reasons behind it should weigh on the NZD today.

RATES: Kiwi rates are expected to open broadly unchanged.

REVIEW

CURRENCY: A brief spike above 0.80USD was not sustainable yesterday and overnight a mixed GlobalDairyTrade auction and US Fed Chairman testimony ensured a dip to support was easily achieved.

GLOBAL MARKETS: A seesaw night as financial markets had plenty to digest in the way of data, headlines and Fed Chairman Bernanke's semi-annual testimony. The main market mover was Bernanke's speech, which saw an initial sell off on the disappointment of additional monetary policy being some months away, before a subsequent recovery. There was an immediate reaction on FX markets, with the USD strengthening across the board: EUR/USD fell over a big figure before rebounding to 1.2280. Commodity prices were dragged lower as were equities initially. European stocks closed the session down marginally, the FTSE was back 0.8% on a weaker CPI print. US equities staged a larger recovery, up 0.7% at the time of writing, with reported earnings from Coca Cola above expectations. Interestingly, the moves in US treasuries were more muted, with yields up a couple of bps.

KEY THEMES AND VIEWS

SO WHAT DID BERNANKE SAY? "The Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability." In reality, Bernanke didn't say anything new. It is clear that an improvement in the labour force is the Fed's primary concern at present, followed by avoiding deflation in the economy. Bernanke considers quantitative easing and 'Operation Twist' to have been effective. While side effects and risks mean that these tools shouldn't be used lightly, there is still capacity for these tools to help the economy. When asked directly, Bernanke stated that the logical range of additional policy easing includes: different types of asset purchase programs including treasuries and MBS, using communication, via the discount window, and cutting the interest rate on excess reserves.

OTHER EVENTS AND QUOTES

� Headline GlobalDairyTrade prices fell 0.9%, with WMP back 5.8%, but offset to some degree by stronger SMP and milkfat product prices.

� Finland and Spain have reached a bilateral agreement on collateral for the Spanish bank bailout. No other country has demanded collateral for the funds except Finland. The funds will come from the deposit guarantee fund, and the deal will have similar arrangements to the one negotiated between Finland and Greece.

� Greek finance ministry official: "Greece is seeking a bridge loan to cover financing needs until September".

� Italian PM Monti says concerned at possibility that the Sicily region could default.

NZD/USD: Growth?

Or the lack of it on the global stage will eventually weigh on the fortunes of the NZD. At this point resistance seems relatively solid above 0.80USD while support around 0.7930 holds. Today trading within recent ranges continues.

Expected range: 0.7938- 0.7998

NZD/AUD: Kicking it?

This cross lurks around technical support currently as the low inflation outturn locally delivered the fall. Further falls are expected although reaching the next technical level (0.7709) is not likely today.

Expected range: 0.7722 - 0.7767

NZD/EUR: Lacking conviction?

Further looks towards the topside on this cross are possible but the road is getting decidedly hard given global growth implications. Technical support continues to lift but any break would initially be mild.

Expected range: 0.6484 - 0.6518

NZD/JPY: Return of the yield hunters?

With global yields continuing to remain justifiably low the search continues for yield. Relatively speaking New Zealand presents such opportunities and this is helping to support this cross.

Expected range: 62.50 - 63.25

NZD/GBP: Little change?

Nothing new to report here as this cross is contained on the downside by support at 0.5080. UK June inflation fell more than expected and helped to prevent a break of support for now.

Expected range: 0.5080 - 0.5120