• Swiss government after meeting with manufacturers : Persistent strength of the Swiss franc versus the euro and the dollar poses a considerable risk to the Swiss economy
  • US retail sales rise 0.6% in Dec; slightly lower than forecast
  • US CPI rises 0.5%/ 0.1% core; headline rate slightly firmer than expected
  • US industrial production rises 0.8% in December; capacity use rises to 76%, highest since July 2008
  • University of Michigan consumer sentiment index falls to 72.7 from 74.5; much weaker than expected (75.6% expected)
  • US business inventories rise 0.2% in November
  • American Bankers Association sees 3.3% US GDP growth in 2011; slow jobs improvement, inflation contained
  • German FinMIn reiterates opposition to join euro zone bonds; rescue plan does not need to be enlarged
  • French FinMin Lagarde: Sees March as the time frame for comprehensive euro crisis package
  • US consulting firm forecasts euro rescue fund to be increased to EUR 500 bln from EUR 440 bln
  • Fitch downgrades Greece to BB+ (junk) with negative outlook
  • Fed’s Lacker: Dollar proved it retains reserve status during crises; Fed could rethink QE2 as economy improves
  • SNB posts CHF 26 bln loss on forex reserves in 2010; total loss of CHF 21 bln
  • Fed’s Rosengren: Fed follows broad price trends, not narrow commodity market (gold)
  • S&P 500 rises to new post-Lehman highs of 1293, up 0.75%
  • 10-yr Treasury ends up 2.5 bp at 3.33%
  • Gold ends at $1361 after falling as low as $1356 intraday

Friday was a session of backing and filling for EUR/USD. Having peaked in London at 1.3458, we traded in a 1.3314/1.3405 range in New York.

Session highs were seen shortly after the last of the US data releases were out of the way. On balance, much of the data today was disappointing, though the industrial production report was a pleasant surprise.

We slipped to 1.3314 as London squared up for the day, triggering a few small stops below the 1.3320/25 level. A report from a US consulting firm suggested the long-awaited euro zone rescue package may only increase the fund to EUR 500 bln from EUR 440 bln. Big deal, was the market’s reaction.

Central bank bids were seen on the dip, however, and EUR/USD soon rebounded into the 1.3350s.

We end the day on a quite firm note ahead of the US long weekend, at 1.3385 very late in the day. Central bank sellers were seen above 1.3425 in London trade, we were told.The 100-day average at 1.3410 remains a tough medium-term stumbling block…

USD/JPY slipped back after the softer US data, after a 83.00 digital option was defended in early US action. We dipped to 82.50 on the softer US data but soon raced back above 83.00 on buying of EUR/JPY and GBP/JPY. Stop-loss buy orders are eyed above the 83.30 level now while good buying interest out of Tokyo is layered between 82.25 and 82.50.

GBP/USD help below resistance in the 1.5910 area, weighed down by EUR/GBP buying. GBP continued to rally versus JPY today. 1.5890 is capping repeated rallies.

Commodities currencies were very choppy today. USD/CAD jumped to 0.9975 on short-covering only to run into yet more selling from real money accounts. We end the day at 0.9900.

AUD drifted lower for much of the US session. The failed rally above 1.00 earlier this week prompted many to trim short-term bullish bets as the aftermath of the flooding makes for an uncertain near-term outlook. Yet another Chinese reserve ratio hike was a drag as well.

EUR/CHF extended its gains in Europe, as did EUR/USD but spent the US session consolidating its big gains. European sovereign debt markets were blessedly quiet today, a major plus for EUR/CHF bulls.

Resistance for the cross comes in just above 1.3000. We close the week at 1.2895.