The buck extended its decline against most of the major currencies as markets continued to trade with a risk-on tone amid better US jobs data, successful EU government auctions and better than expected earnings. The dollar was weakest against European currencies with the SEK outperforming (currently up +1.06% against the USD). The greenback was slightly firmer against the Japanese yen as well as the commodity currencies AUD, NZD as a result of weak economic data overnight. New Zealand 4Q consumer prices unexpectedly fell -0.3% q/q (cons. +0.4%) while Australia’s employment change showed a surprising decline of -29.3K in Dec. (cons. +10.0K).
There were plenty of U.S. data releases today, most notably weekly initial jobless claims which fell 50K to 352K from an upwardly revised 402K. The print was the lowest reading since April 2008 and the 4-week moving average in initial claims declined by -3.5K indicating that the labor market is moving in the right direction. December housing data was not as bright as building permits declined -0.1% to 679K from the prior 680K and housing starts saw a drop of -4.1% to 675K from 685K as the housing market continues to struggle. Regional manufacturing readings showed expansion with the Philadelphia Fed index printing 7.3. December CPI figures were mostly in line with expectations with the m/m headline reading at 0.0 while the core reading came in at 0.1% m/m.
Despite better than anticipated Nov. manufacturing sales (2.0% vs. exp 1.2%), the Loonie was mostly softer as commodities declined with WTI crude lower and testing the 100 level. USD/CAD broke below long term triangle support to test session lows of nearly 1.0070 before rebounding to current levels just above the 1.01 figure.
The euro continued to rally after successful auctions in France and Spain and as Greek debt talks progressed. The French auction was the first since the country lost its AAA rating from S&P, which saw borrowing costs fall. The IIF said that debt talks with Greece today were ‘productive’ and that negotiations will resume tomorrow. EUR/USD surged on a break above the 21-day SMA and appears to be approaching the 1.30 big figure.
Bundesbank President Weidmann was on the wires again today repeating comments made yesterday as he urged the ECB against engaging in unlimited government bond purchases as it would violate EU law. On the German economy, Weidmann said that while it may have shrunk slightly in 4Q, it is expected to grow 0.6% this year and 1.8% in 2013.
The yen was weaker and USD/JPY tested near the highs of January as the pair rallied to the 77.30/35 level. USD/JPY sees the convergence of 21 and 100-day SMA’s come in around 77.15/20 which is likely to be a pivotal level on a daily closing basis. EUR/JPY also moved sharply higher to test the 100.00 big figure which looks to be near term resistance as the pair currently trade around the 99.90 level. The weakness in the yen comes as markets trade with a risk-on tone and sells safe havens in favor of riskier assets.
U.S. equities finished higher for the third consecutive session with the DJIA closing up about +0.36% while the S&P 500 advanced +0.49% on the day. UST yields were higher across the curve with the 10-year yields up nearly 8 bps to about 1.97%. In the commodity space, gold is currently lower by about -0.17% while crude oil is down about -0.18%.
Due out of the Asia/Pacific session are China’s January unofficial HSBC flash manufacturing PMI and MNI flash business sentiment survey. Japan’s November all industry activity index, coincident index and leading index are also set for release as well as Australian 4Q import and export price indexes
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