- Philly Fed index tumbles to 41.3 in February from 24.3 in January
- January US leading indicators rise 0.4%
- Germany’s Merkel: Euro zone is strong; won’t speculate on how eurozone would aid member state in need
- BOE’s Gieve: Japanese-style deflation possible in UK, not inevitable; Quantitative ease should begin within weeks; Fed, ECB, BOE should have acted sooner to avoid asset bubbles
- Fed’s Lockhart: Deflation not a major risk at moment, must be watched
- Obama meets Harper in Ottawa; soft-peddles Nafta differences
- Dow Jones closes at lowest level since October 2002 at 7466, down 1.2%
USD/JPY was an absolute star today, sprinting higher during the US morning amid a nascent reflation trade but holding onto its gains once the markets turned south as the session wore on. It came close to the 94.63 highs from early January, stalling just shy of moderate exporter offers at 94.50.
EUR/USD was boosted by earlier reports that Germany would consider aid for Eastern Europe as well as several EUR/USD buy recommendations, chief among them Goldman’s call for 1.3500 on overblown fears of contagion from Central and Eastern Europe (CEE). The rally caught many short and sent markets soaring to 1.2759 before stunningly weak Philly Fed data ended the reflation trade and prompted profit-taking intraday.
EUR/JPY was boosted by both legs of the cross before the Philly Fed data snuffed the EUR/USD rally. The cross reached 120.34, triggering good stops above the repeated highs at the 120.01 level.
