Overnight, NZD/USD nudged a littler lower, falling from just under 0.6740 to around 0.6690. It was really GBP/USD that led the charge lower last night, plunging from 1.7000 to around 1.6750, after the Bank of England surprised markets by expanding its quantitative easing program by £50b to £175b. Modest losses in US equities tempered risk appetite a little, which also served to moderate enthusiasm for growth sensitive currencies like NZD. The main focus today will be the RBA's quarterly statement on monetary policy (due 1:30pm). In light of the recent string of stronger than expected Australian data, market participants will be looking for clues on how close the RBA is to raising interest rates. After that, the market will be looking towards US non-farm payrolls. We suspect it will take quite a negative surprise (the market is looking for a drop of 328,000) from non-farm payrolls to dislodge the current optimism about the global recovery and improving risk appetite. For today, we suspect dips in NZD/USD will be limited to 0.6650. Some resistance is expected around 0.6760, but we continue to think a push higher towards 0.6800-0.6850 is likely in coming sessions. The USD strengthened against all the major currencies last night, but it was really GBP that took centre stage. GBP/USD plunged from around 1.7000 to nearly 1.6750 after the Bank of England (BoE) surprised investors by extending its quantitative easing program by £50b to £175b. The Bank of England said Britain's downturn appeared to have been deeper than previously thought, and while there were some signs of recovery, tight credit conditions would remain a considerable drag. The decision shocked many investors who had been starting to take a brighter view of the British economy after the string of better than expected data. The sharp decline in GBP/USD paved the way for generalised USD strength. EUR/USD slipped from above 1.4400 to below 1.4350, despite upbeat comments from ECB President Trichet. As widely expected, the ECB left rates unchanged at 1%. But Trichet went out of his way to downplay deflation fears and reiterated that the Eurozone was likely to return to positive growth later in 2010. We still believe that the Eurozone will need a weaker currency to kick-start any recovery, but the ECB's reluctance to ease rates further means any sell-off in the EUR will be dependent on events in the UK and the US. A lacklustre session for US stock markets tempered risk appetite a little, which also helped the firmer USD tone. Despite European equities rising 0.5-1.0%, US equities recorded modest losses. US data was mixed "“ jobless claims (for the week ending August 2) rose just 550.000 vs. 580,000 forecast, but ICSC chain store sales showed a 5% in retail sales in July. There's also been some chatter about analysts scaling back enthusiasm for financial stocks. The net result was a dour day on Wall Street, where the S&P500 is currently down 0.7%. The focus now shifts towards tonight's US non-farm payrolls. Economists are looking for a drop of 328,000 jobs in July and the unemployment rate pushing up to 9.6% from the 9.5% seen in June. Provided tonight's data doesn't dent investors' risk appetite and global recovery hopes, we suspect the USD will remain heavy in coming weeks. On the USD Index, near-term bounces will likely be limited to the 78.50 region. However, a break below the 10-month low of 77.45 is needed to open up a deeper correction towards 75.90-76.00.