- US Q4 GDP revised higher to 3.1% from 2.8%
- University of Michigan consumer sentiment index falls to 67.5
- EU Summit ends with little progress (EU again over-promises, under-performs)
- Fed’s Plosser says Fed should raise rates and sell bonds bonds when time comes to tighten. Policy shift should come before too long.
- Fed’s Fisher, Kotcherlakota, Lockhart, Evans all speak in favor of letting QE2 end
- Portugal fails to form coalition; elections in May
- Canadian PM Harper loses confidence vote; election presumed in May
- Moody’s downgrades Spanish mortgage bonds
- US 10-year notes rise 4 bp to 3.45%
- S&P 500 rises 0.3% to 1314
- Gold slides on hawkish Fed-speak; ends at $1428; lows of $1422.50 intraday
EUR/USD fell sharply late in the London session, weighed down by some of the more hawkish comments herd from a Fed president not named Hoenig in recent memory. Philly Fed chief Plosser strayed far off the Fed reservation today and gave the dollar a broad lift while cementing the market’s view that QE2 will run its course in June and there will be no QE3 to follow it up.
From intraday highs around 1.4155 just before the fixing, EUR/USD began its slide. It reached the high 1.4050s before regaining its footing. A bounce to the low 1.4080s was sold and we slipped to 1.4052 before calling it a day.
Last week we went out on the highs near 1.4200; this week we go out near our lows, just above 1.4050… This week the major event was the failure of EUR/USD to surmount the 1.4280 high from November nor breach the downtrend from 1.60 which came in around 1.4300 this week…
USD/JPY was boosted by firmer US yields and a spike to the topside in AUD. Sellers at 81.50 kept a lid on the greenback, however. Heavy selling is seen on the approach of 82.00, beginning around 81.80, dealers say. The downside ha been limited to the 80.50 area this week. Boring is beautiful to the BOJ…
Cable was crushed today, falling back close to 1.60. We’ve essentially retraced the entire rally to 1.6400 in four sessions. 1.5980 remains important support; Stops are not far below.
AUD/USD made a new record high for the free-floating era, rising to 1.0294. Heavy stops were triggered above the 1.0260 level, as feared. Large-scale buying of deep-out-of-the-money AUD calls (1.08 strikes) was heard today. 1.0300 and 1.3050 barriers are rumored along the way. It looks like we may close just below the old 1.0257 high (1.0253 ow) which would be a mild disappointment for the bulls from a technical perspective.
USD/CAD rallied sharply ahead of the confidence vote in the Canadian parliament. The generally firmer dollar contributed but locals must have had a sense that Harper’s government was headed for a fall. There was little spot reaction to the actual no-confidence motion passing. We end at 0.9815.
