Currency Updates:
U.S. Dollar Trading (USD) rampant QE3 speculation sent US stocks up over 2% and risk assets soaring overnight with the Bernanke speech today now taking on greater significance. The recent Fedspeak from members of the FOMC has left the door open for more QE3 if the economy deteriorates and the latest string of data has disappointed. Looking ahead, Weekly Jobless Claims forecast at 377k vs. 383k previously. Also ahead, FED Chairman Bernanke Testifies before the Joint economic committee in Washington.
The Euro (EUR) the ECB meeting was a non event with the decision to leave interest rates 1.00% with the ECB President Draghi quite calm given the financial storm in Spain and instead focusing on inflation expectations. He did note that some ECB members wanted a rate cut but that other measures to help Spain were outside the ECB jurisdiction currently. Spain has a very important 10yr bond auctions at the start of Europe today that will be closely watched by the market.
The Japanese Yen (JPY) the USD/JPY gained overnight even on the QE3 talk as crosses surged higher with AUD/JPY the main leader up over 2% on the day. The USD/JPY closed above Y79.30 and traders are getting more comfortable buying in the risk on environment and expectations of further BOJ verbal intervention on dips. The Bernanke QE3 speech is of extreme importance for the USD/JPY direction as the major is very sensitive to US monetary policy.
The Sterling (GBP) the return of UK traders after two days of holidays saw the GBP/USD play catch up with a sharp rally to 1.5500 at the start of the European trade before consolidating as the EUR/USD struggled to match over risk asset rallies. The BOE meets tonight and not change is expected in either the headline rate or the UK QE. Looking ahead, Spanish 10 yr Bond Auction and Bank of England Rate decision.
Australian Dollar (AUD) the AUD/USD was the best performing currency in the market overnight with the Q1 GDP smashing expectations at 1.3% vs. 0.5 % Q/Q and giving the Australian growth rate a 4 year high. The RBA had cut rates just the day before so the result confounded traders who had gone extremely bearish in recent weeks. UPDATE Australian May Employment at 38.9k vs. -2.2k forecast.
Oil & Gold (XAU) Gold surged against the USD but found resistance at $1640 and reversed sharply later in the day on profit taking flows down to $1615 before stabilizing. OIL/USD moved higher but contained settling just above the $85.50 level.
