Currency Updates:
U.S. Dollar Trading (USD) volatility returned to the market overnight with the EU finance ministers rejecting the Greek bondholders 4.0% coupon demand on a debt swap. Stocks dropped in Europe and in the US and helped the Dollar gain on safe haven demand. The dip was shallow though and most markets pared losses into the end of the session. In US stocks, DJIA -33 points closing at 12675, S&P -1 points closing at 1314 and NASDAQ +2 points closing at 2786. Looking ahead, FOMC Interest Rate meeting forecast to hold at 0.25%. Focus on the FOMC Statement and Press Conference afterwards.
The Euro (EUR) concerns over new threats to the Greek debt deal was countered by stronger than expected economic data. January PMI surveys showed improvement with Manufacturing improving to 48.7 vs. 46.9 previously and Services at PMI forecast at 50.5 vs. 48.8. Also helping sentiment was solid debt Auctions from Spain. Looking ahead, January German IFO Business Climate forecast at 107.5 vs. 107.2 previously.
The Japanese Yen (JPY) was the big mover in the market after the Yen sold off aggressively across the board when the BOJ downgraded the growth outlooks for Japan and deteriorating Trade balance. December Trade Balance at -205bn vs. -139bn forecast. EUR/JPY broke above Y101 to multi-week highs.
The Sterling (GBP) Dipped with the EUR/USD going into the European session but was well supported and tested 1.5600 at the end of the US session. BOE Governor King talked up the prospect of more QE at the next BOE meeting to help the recovery. Looking ahead, Q4 GDP forecast at -0.1% vs. 0.6% previously. January MPC Vote forecast at 0-9-0 for a consensus hold vote.
Australian Dollar (AUD) the Aussie was a noted underperformer with the recent rally on most pairs including the USD coming under profit taking pressure. The notable exception was the AUD/JPY which continued to track higher and closed above Y81. UPDATE Q4 CPI at 3.1% vs. 3.5% previously
Oil & Gold (XAU) Gold fell on USD strength back below $1670 but found support quickly at $1665. Oil traded lower but support was found under $98.50
