- Canadian leading indicators rise 1.5% in December
- US TIC data shows massive inflows into US in November
- BOC leaves rates unchanged; Strong CAD to weigh on recovery; repeats Q2 rate vow
- Greek finance minister: Economic statistic problem extremely severe
- German government: Domestic demand to fall in 2010
- BOE’s King: MPC will wait and see before making decisions on QE
- French deficit forecast revised lower to 8.2% in 2010 from 8.5%
- S&P 500 rises 1.3% to 15 month high; boosted by expected Republican Senate victory
- US yields recover overnight slide; 2-year ends at 0.89%, ten year at 3.70%
- Oil rallies $1 to 79.03; gold ends at $1138, firm in range
EUR/USD fell below a series of important supports today but ended up closing above them, leaving dollar bulls somewhat disappointed. Prices spent the bulk of the session below the 200-day moving average at 1.4290 but ended just above that level. Support in the 1.4255/60 area was probed, with lows of 1.4253 seen, but prices soon recovered.
The dollar was boosted across the board in early US trade by upbeat prospects for the Massachusetts Republican, Scott Brown, winning the special election and potentially slowing the Obama administrations ambitious social agenda. Stocks were boosted by the same prospects. The risk trade took over in the afternoon and EUR/USD managed to claw back some lost ground. Central bank bids were rumored toward 1.4250 but we did not run across anyone who saw them first hand.
USD/JPY rebounded in US trade, supported by a recovery in US yields. Reports that JAL may need to lift currency hedges as part of their bankruptcy made the rounds as well. Some say that should undermine the dollar, but the logic does not work for me. JAL’s exposure in forex is there receivables from American, English, European travelers to Japan. They would buy JPY as a hedge, logic would dictate. To me, the risk is that they would sell JPY against the crosses and dollar to lift hedges…Fuel hedges would prompt them to sell oil or jet fuel contracts.
USD/JPY reached 91.26 before stalling ahead of reported offers in the 91.30/50 area.
Cable was whippy but firmed for much of the US session. It reached 1.4385 before BOE Governor King spoke this afternoon on hopes that this morning’s strong inflation data would prompt a hawkish speech. He was not particularly hawkish, calling the inflation spike temporary and saying the MPC will wait and see before changing the QE policy. EUR/GBP broke support at 0.8720 ahead of the speech but recovered to 0.8735 late. 0.8700 support remains intact.
AUD/USD slipped to 0.9170/75 during the US morning but failed to trigger stops below that level an zoomed higher as the session unfolded. It reached the 0.9255 area before stalling.