Risk Stabilizes Amid Central Bank Meetings, Greek Austerity Deal
Sentiment was moderately higher after Greek leaders agreed on an austerity package ahead of a meeting between EU finance ministers. The dollar is mostly weaker against the majors with the exception of the JPY, AUD, and NZD as stocks and Treasury yields advance. Key central banks made policy announcements this morning with the Bank of England maintain rates at 0.50% and expanding its asset purchase target by 50B£ to 325B£ as expected while the European Central Bank kept rates on hold at 1.00% as expected.
The pound was mixed as December industrial production and manufacturing production rose by more than expected with prints of +0.5% m/m (cons. +0.2% prior -0.5%) and +1.0% m/m (cons. +0.2% prior -0.1%) respectively. Sterling was given a boost after the BOE's QE announcement which UK PM Cameron supported as the right stance to have as it supports growth, investment and lending. GBP strength faded however after the NIESR UK GDP estimate showed a contraction of -0.2% in the 3-months through January which confirmed earlier comments by the BOE that the near term growth outlook remains weak. GPB/USD is consolidating just above its daily Tenkan line and sees significant resistance around the 200-day SMA.
The ECB rate announcement was no surprise but the less dovish comments by President Draghi was supportive of the euro as he noted that the Euro-area economy will recover 'very gradually' in 2012. He said that stress in the markets have diminished due to ECB measures though the impact of LTRO is still unfolding. Draghi declined to comment how its Greek holdings will be treated and said that the ECB didn't discuss a change in interest rates today. The euro responded positively to the commentary and is currently higher against all of the G10 currencies.
News that Greek officials finally reached an agreement on austerity also helped to lift the common currency. The announcement came just before EU finance ministers met to discuss a second aid package for Greece. The meeting did not produce results as Germany's Schaeuble mentioned earlier and EU Commissioner Rehn said that the ministers must 'thoroughly scrutinize' Greece's agreement.
Economic data out of the U.S. was encouraging as weekly initial jobless claims fell to 358k from the prior 373k (cons. 370k). The 4-week moving average in claims dropped to 366.3k which is the lowest since April 2008. December wholesale inventories rose by more than anticipated with a gain of 1.0% (cons. 0.4%, prior 0.0). The positive data and news out of Europe helped equities edge higher with the DJIA finishing up by about +0.05% while the S&P 500 closed the day higher by around +0.15%. U.S. 10-year Treasury yields rose above the 2.00% level and 100-day SMA as sentiment stabilized and are currently higher by 5.6bps to 2.036%. The move higher in yields helped the USD to outperform against the JPY, with USD/JPY breaking above the 100- and 55-day SMA's.
On the data front for the upcoming Asia/Pacific session are NZ card spending figures for Jan., Japan's Jan. domestic CGPI, and the RBA will release the board statement on monetary policy |
