Morning Forex Fundamental

EUR

'The more time passes ... the more we see signs it [three year refinancing operation] has been an effective policy measure' - Mario Draghi, the ECB president
ECB sees 'substantial' effect from its refinancing operation
Impact High
The European Central Bank's 489 billion euros allotted among euro area banks at a record rate of one per cent are supporting the region's economy, said the ECB president on Thursday.
'The extensive recourse to the first three year refinancing operation indicates that our non-standard policy measures are providing a substantial contribution to improving the funding situation of the banks, thereby supporting financing conditions and confidence,' ECB President Mario Draghi told at news conference after the ECB kept its key rate at one percent.
'The more time passes ... the more we see signs it has been an effective policy measure,' Draghi said. 'This decision has prevented a credit contraction that would have been ... much, much more serious.'

USD

'You get better job growth, people hear about it and you get better sentiment and better spending' - Maury Harris, chief economist at UBS Securities LLC
Consumer sentiment rose more than expected in January
Impact High
U.S. consumer sentiment rose to eight-month high in January as Americans became more confident on the outlook for the economy. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment advanced to 74 from 69.9 at the end of the previous month.
'You get better job growth, people hear about it and you get better sentiment and better spending,' said Maury Harris, chief economist at UBS Securities LLC in New York.
Purchases early in 2012 'may not be quite as strong as the fourth quarter, but I still think you have an acceptable year in consumer spending,' he said.

GBP

'The trend [in producer inflation] is moving in the right direction, and this will contribute to lower consumer price inflation in 2012' - David Kern, chief economist at the British Chambers of Commerce
U.K. producer prices declined in December
Impact: High
U.K. producer output prices fell in December for the first time since June 2010, as input prices eased 0.6 per cent. Factory gate prices dropped 0.2 per cent from November, the Office for National Statistics announced on Friday.
'Though price inflation for both inputs and outputs is still relatively high in absolute terms, the trend is moving in the right direction, and this will contribute to lower consumer price inflation in 2012,' said David Kern, chief economist at the British Chambers of Commerce.
'As the squeeze on businesses and consumers eases, there will be scope for demand in the economy to improve gradually later this year.'

CHF

'Bond sales in Italy and France, because the countries have more problems, will offer more of a guide for the market' - Arnaud Scarpaci, a fund manager at Agilis Gestion SA
Swiss stocks slid on Friday
Impact: Medium
Swiss stocks closed lower on Friday on concern some euro area countries may be downgraded by Standard & Poor's in the next few days. These expectations were proven to be justified later that day.
The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, shed 0.36%, or 21.73 points, to 5,996.34. The broader Swiss Performance Index declined 0.30%, or 16.53 points, to 5,411.38.
Swiss Federal Statistical Office is to announce producer price inflation later today. Inflation dropped 0.8 percent in November after declining 0.2 percent in October.
 
JPY

'The ECB's liquidity injection is keeping the debt crisis from spreading' - Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc
Japanese stocks rose sharply on Friday
Impact: Medium
Japanese stocks rose on Friday, after Spanish and Italian borrowing costs decreased, a sign investors are more optimistic on the economic outlook for the countries.
The Nikkei 225 gained 1.36%, or 114.43 points, to 8,500.02, while the broader Topix advanced 1.02%, or 7.45, to 734.60.
'The ECB's liquidity injection is keeping the debt crisis from spreading,' said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc.
'The yen's rise against the euro had weighed on Japanese stocks. Now that's taking a pause, the bias is for equities to be bought back.'

Press Review

Europe

S&P has downgraded ratings of 9 Eurozone countries, including Italy, Spain and Austria. France is likely to lose its triple-A rating to AA+, while Germany retained its AAA status with a stable outlook. Merkel has already said more has to be done to address the prolonged financial woes.
By January 30, the EU members will design the preliminary financial pact agreement to make the European Union more financially integrated.

Thomas Jordan was appointed as interim head of the SNB after P. Hildebrand resigned yesterday.
Euro Leaders Race to Salvage Rescue Plans

http://www.bloomberg.com/news/2012-01-16/euro-leaders-race-to-salvage-rescue-plans-rebuked-by-s-p-rating-downgrades.html

European leaders will this week try to rescue under-fire efforts to deliver new fiscal rules and cut Greece's debt burden as they urge investors to ignore Standard & Poor's euro-region downgrades.
Greek PM: Two Deals But No Drachma Ahead

http://www.cnbc.com/id/46004247

In his first and only interview since taking office, Greek Prime Minister Lucas Papademos took straight aim at those who suggest Greece should abandon the euro and return to the drachma as a way to solve the country's fiscal crisis: 'This is really not an option

USA

Although the latest US macroeconomic data - 8.5% unemployment rate, increasing consumer and manufacturers confidence, recovering property market and soaring durable goods sales - suggests the national economic recovery is adding to gains, economists fear the economy might be directly and negatively affected by the EU financial woes.

Iranian oil embargo, triggered by the US, is facing mixed acceptance in the global market. The EU are still resisting from participation in the embargo, along with several Asian companies.
Fed officials say not time to buy bonds now

http://www.reuters.com/article/2012/01/13/us-usa-fed-lacker-idUSTRE80C21T20120113 

Two top Federal Reserve officials, including a policy centrist, said on Friday the central bank should hold off buying more bonds to boost growth given a strengthening in the economy.
Jon Huntsman will leave Republican presidential race, endorse Mitt Romney, officials say

http://www.washingtonpost.com/politics/2012/01/15/gIQAt6c51P_story.html

Former Utah governor Jon Huntsman Jr., whose campaign for the Republican presidential nomination never took off, will quit the race Monday morning and endorse former Massachusetts governor Mitt Romney, according to campaign officials with knowledge of the decision.

Asia & Pacific

China's trade surplus unexpectedly rose last week as experts were expecting a decline (16B act./8B est.). The data suggests the Chinese economy remains intact for now to the EU debt crisis.
China and Japan signed a currency deal which would involve direct currency exchange between two countries, omitting the American dollar from their reciprocal operations.
China to ease controls on HK listings: regulator

http://www.reuters.com/article/2012/01/16/us-china-regulator-idUSTRE80F07120120116

China's securities regulator plans to relax controls on Hong Kong and overseas listings for Chinese companies and will push for issues of yuan-denominated shares in the offshore yuan market, its vice chairman Yao Gang said on Monday.
Asia falls after S&P's Europe downgrades

http://www.marketwatch.com/story/asia-falls-after-sps-europe-downgrades-2012-01-15

Asia markets fell on Monday after a string of downgrades from Standard & Poor's and stalled debt talks in Greece thrust Europe's ongoing debt crisis back into the spotlight