• Fed’s Bullard: Possible to end QE2 early; oil shock not a big risk
  • Fed’s Dudley: Improved growth no reason to shift policy
  • US personal income rises 1.0%; spending up 0.2%; savings rate rises to 5.8%; Core PCE index rises 0.8% y/y
  • Canadian GDP rises 3.3% in Q4 versus expectations of a 3.0% rise
  • Chicago PMI rises to 71.2 from 68.8; much firmer than expected; highest since 1988
  • US pending home sales fall 2.8% in January
  • Deutsche Bank downgrades US Q1 GDP forecast to 3.8% from 4.5% annual rate
  • Dallas Fed index rises to 17.5 from 10.9
  • Eurogroup’s Juncker: Debt deal will be finished in two weeks
  • US calls for Gaddafi to stand aside; freezes assets
  • S&P 500 rises 0.6% to 1327
  • US 10-year note yield unchanged at 3.42%
  • Oil falls $1.00 to $96.88

EUR/USD rallied quite close to the February 1 high at 1.3862 today, reaching 1.3857 before the rally fizzled. A barrier at 1.3850 was defended but the market was able to take it out and make a run for the highs but was unable to sustain the lofty levels. EUR/USD pulled back below a number of intraday bottoms around 1.3820 and triggered stops in advance of the 16:00 GMT fixing, belying chatter throughout the session that dollars would be heavily sold at the fixing. If anything, the business was mixed with buying of USD/JPY and USD/CHF seen at 16:00 GMT…Prices slipped as low as 1.3780 on profit-taking as it became clear that 1.3863 would not be easily overcome. We end at 1.3803. Offers are seen at 1.3815/20 near-term.

USD/JPY rallied close to 82.00 during the US morning. JPY was sold versus GBP and AUD, suggesting that risk aversion is easing as Gaddafi’s grip on power in Libya looks tenuous at best. We eased during the afternoon and traded a tight 81.74/98 range overall.

GBP/USD rallied quite strongly at month-end, catching the market off guard. EUR/GBP is traditionally bought at month end (as the UK makes its payment to the EU on the last day of the month. That usually keeps cable under wraps, but it was off to the races, surging as high as 1.6275 testing critical resistance. EUR/GBP fell sharply, reaching 0.8477 from 0.8555 in London trade.

EUR/CHF recovered lost ground today as oil prices eased, rising to 1.2860 at its best levels USD/CHF rose as well but stalled once again above 0.9300. Take a sustained move through the 0.9300 area as a sign that the worst of the dollar slide may be over.

Commodity currencies traded firmly today. USD/CAD fell as low as 0.9706 as Canadian GDP came in firmer than expected. AUD/USD recovered overnight losses and ends near its highs in the 1.0190 area.