Sentiment Higher as BoE Eases, Greek Leaders Agree on Austerity

USD is weaker against all of the G10 currencies except for the JPY and NOK. The Dollar Index continues to decline within its daily ichimoku cloud and approaches possible support at the base of the cloud around 77.85/90. Risk sentiment is firmer after the BOE announces more accommodative policy and Greek party leaders reach an austerity deal. European stock markets are currently trading to the upside and US equities are mixed with the DJIA currently up about +0.08% while the S&P 500 is lower by around -0.05%. The U.S. 10-yr Treasury yield is higher and above the 100-day SMA and 2.00% level. On the data front, weekly initial claims fell by more than expected to 358k from the prior 373k (cons. 370k) and December wholesale inventories rose 1.0% (cons. 0.4% prior 0.0). The better than expected data has taken a backseat to central bank news and Greek headlines however headline risk remains as EU finance ministers gather in Brussels.

EUR is broadly higher after Greek officials announce that party leaders agreed on a deal for austerity. The news comes just before EU finance ministers meet to discuss details of additional aid for Greece. The ECB kept rates on hold at 1.00% as expected and President Draghi declined to comment how its Greek holdings will be treated. He noted that the economic outlook remains subject to "high uncertainty and downside risks" and said that the ECB didn't discuss a change in interest rates today. The euro is stronger against all of the majors and is outperforming against the yen with EUR/JPY currently testing the 100-day SMA which comes in just ahead of the 103 figure. EUR/USD is firmer and fluctuating around the 1.33 figure with the 100-day SMA looming above at around 1.3330.

GBP mostly firmer as the BOE expands its asset purchases by 50B£ to 325B£ as expected. The bank said that inflation is likely to fall sharply and noted that the near-term growth outlook remains weak. UK PM Cameron spoke afterwards and backed the BOE saying that QE is the right stance to have as it supports growth, investment and lending. The GBP initially rallied after the announcement but softened after the NIESR GDP estimate showed a contraction of -0.2% in January. Earlier data releases showed better than expected Dec. industrial production (0.5% vs. exp 0.2% m/m) and manufacturing production (1.0% vs. exp 0.2% m/m). GBP/USD is currently trading around 1.5830 and sees short term support around the 200-hr SMA which comes in around the 1.58 figure. To the topside, the pair sees the 200-day SMA around the 1.5935 area. GBP/JPY is higher and testing horizontal resistance and a possible inverse H&S neckline just below the 1.23 figure.

JPY lower across the board amid softer data (machine orders fell -7.1% m/m in Dec., machine tool orders fall -6.6% y/y in Jan. from the prior +17.4%). Of the G10 currencies, the yen is weakest against the EUR (see above for levels). USD/JPY is trading higher and is currently above the 100-day and 55-day SMA. The pair is now testing resistance around 77.40 which is the 61.8% Fibonacci retracement of the decline from 2012 highs to lows.

NZD is marginally higher despite much better than expected labor data. New Zealand's 4Q unemployment rate fell to 6.3% from the prior 6.6% while the market was anticipating a drop to 6.5%. Kiwi has been consolidating against the dollar between the 0.83-0.84 figures and remains in a bullish parallel channel which began at the lows of December.