• US GDP rises 3.2%, below expectations for 3.5% rise; internal composition of report very upbeat as inventory reduction was the primary drag on growth; Final sales highest since 1984 in Q4.
  • Early March EU summit to discuss comprehensive reform package being considered
  • Germany may propose EU competitiveness pact to bring social security systems, wages and corporate taxes
  • Eurogroup’s Juncker: No Greek restructuring planned. Spain is fine
  • Merkel: If the euro fails, Europe fails
  • EU considering extending Greek, Irish loans to 30 years
  • ECB may raise rates on loans to zombie banks
  • Egyptian protests intensify dramatically; Opposition leader El Baradei placed under house arrest; curfews put in place
  • Oil jumps as one-third of world oil supply passes through Suez Canal. Fear revolution could look more like Iran than Eastern Europe… Crude rises 4.3% to$89.35
  • White House let’s Mubarak twist in the wind, threaten to cut aid if reform not undertaken immediately.
  • US equities fall 1.9%; US yields reverse gains after GDP; falls from intraday high of 3.45% to end at 3.33%

The EUR/US rally gave up the ghost this morning as the protests in Egypt intensified dramatically today. The opposition leader was arrested and the military was sent into quell the disturbance with little apparent success.

We largely range-traded between 1.3685 and 1.3740 this morning as very large options-related interest dominated the action, After the expiry the selling intensified, with EUR/CHF and EUR/JPY selling also heavy. EUR/CHF fell about 1.2950 to close to 1.2800 before stabilizing late in the day as the franc played its safe-haven role.

The macro picture in EUR/USD looks far less rosy near-term as prices pulled away from the 61.8% Fibo at 1.3738 (we never closed above). Sellers are seen on rallies to 1.3650/60 near-term while stops are seen below 1.3570 and 1.35401 on weakness. Asian central banks were no where to be found on today’s sell off, once the ball got rolling.

USD/JPY eased on lower US yields and on EUR/JPY selling with the JPY safe-haven playing a small role as well. We fell to 81.98. right into the 81.90/82.00 area where Kampo has been a rumored buyer.

Commodities currencies weakened today despite the surge in oil and gold with risk aversion and DXY buying influencing USD/CAD, pushing it back above 1.0000. AUD shorts were squeezed up to 0.9975 before the Egypt news took center stage but fell right back to the 0.9910 area as fears swelled. It ends at 0.9935.

Cable sold off with EUR/USD with dollar bears spooked enough by the price action to book profits and let the dust settle. It fell as low as 0.5830 and ends at 1.5860.