- US trade deficit narrows to $26 bln in February from $36.2 bln
- US jobless claims dip to 654,000 from 674,000 prior week
- Canadian posts tiny trade surplus after deficit in January
- Iran claims new higher-capacity centrifuges
- Spanish economy minister resigns
- Fitch puts big 3 Japanese banks on credit watch negative
- US bank Wells Fargo announces record earnings
- White House’s Summers: “Freefall” over in next few months
- S&P 500 rises 3.8%, 10-year note closes at 2.92%
Wells Fargo sent US stock markets soaring first thing this morning as they pre-announced recorf Q1 profits. Short-covering in banking shares light a fire under the averages which rose over 3% intraday. The big drop in the US trade deficit (a mixed blessing as it lowers external funding needs but signifies weakness in the underlying economy) was over-shadowed by the Wells news. EUR/USD and EUR/JPY tried to rally initially but both quickly came under pressure. Late in the session, a wave of selling from a US investment house out of both New York and London sent EUR/USD skidding through 1.3230/40 support and all the way down to 1.3127 before running into Chinese bids. A quiet afternoon unfolded from there with EUR/USD settling into a range in the 1.3150s and 60s.
USD/JPY held up well, as one would expect given the news flow but was unable to extend the topside very much. Word that Fitch may downgrade three big Japanese banks sent the pair to 100.55/58 but US selling capped it there.
Cable tested the lows for the week after profit-taking hit the pair hard. Logically, it would have rallied on the upbeat banking news as the UK is dependant on the City of London for 97.28% of its GDP (okay, that’s a stretch…) . Like EUR/USD, it fell back as longs grew nervous that it was not reacting as it “should”. 1.4580/85 remains good support on dips. Prices bounced nearly a penny from those lows in the afternoon.
Commodity currencies bucked the trend of the majors, rallying nicely, helped by the equity rally and a pop in commodity prices. Oil rose 5.5% and The CRB added almost 2% while copper rose 3.75%. Aud ended near 0.7200 and USD/CAD at 1.2250.
