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Major Relief Rally Led By Banks
U.S. Dollar Trading (USD) weakened as risk appetite picked up on strong stocks and commodities. Helping sentiment was the large jump in the NY FED Empire State index to 24 vs. 16. Also strong, NAHB Fed Housing Market index rising to 17 vs. 15 the first rise since September last year. In US stocks DJIA +169 points closing at 10268, S&P +19 points closing at 1094 and NASDAQ +30 points closing at 2214 Looking ahead, January Housing Starts forecast at 0.58mln vs. 0.557mln previously. January Industrial output forecast at 0.7% vs. 0.6%. Also Released, FOMC minutes from Jan 27 meeting.
The Euro (EUR) enjoyed a solid short squeeze as the market experienced a bout of 'Greece fatigue' and focus switched to the improving investor risk appetite. EUR/JPY was especially will bid breaking above resistance at Y123 to close above Y124. The German ZEW survey fell to 45.1 vs. 47.2 previously but was much better than the 42.5 forecast. Overall the EUR/USD traded with a low of 1.3587 and a high of 1.3782 before closing at 1.3770.
The Japanese Yen (JPY) lost ground across the board as Yen crosses soared on a combination of short covering and strong return of risk appetite. USD/JPY tested resistance at Y90.50 and AUD/JPY rallied past Y81. The BoJ meet later this week and could provide clues as the medium term outlook of their loose monetary policy. Overall the USDJPY traded with a low of 89.69 and a high of 90.54 before closing the day around 90.20 in the New York session.
The Sterling (GBP) tracked the Euro higher but was little affected by the inflation data which came in at 3.5% y/y in January and provoked a inflation letter from the Governor of the BOE. EUR/GBP was able to rally of recent lows and reclaimed the 0.8700 handle. Overall the GBP/USD traded with a low of 1.5626 and a high of 1.5798 before closing the day at 1.5770 in the New York session. Looking ahead, January Claimant Count is forecast at -10k vs. -15k previously. Also released, MPC Meeting Minutes.
The Australian Dollar (AUD) broke above 0.9000 as the risk sensitive commodity currency received support from all directions. February RBA minutes showed that the decision to hold was a close call and that further tightening would occur as the economy continued to recover. Overall the AUD/USD traded with a low of 0.8875 and a high of 0.9030 before closing the US session at 0.9015.
Oil & Gold (XAU) accelerated gains as the market surged over $20 an ounce higher. Overall trading with a low of USD$1098 and high of USD$1121 before ending the New York session at USD$1120 an ounce. Crude Oil rallied over 4% on Euros move and demand for risk assets. Crude Oil was down +$3.01 ending the New York session at $77.01.
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