Dollar Steady As Risk Rally Halts, Aussie Dives

Risk rally took a breathe as markets are reassessing Bernanke's comment and the chance of further stimulus from the Fed. S&P 500 pared gains and ended yesterday lower after reaching to highest level in four years. Asian equities opened lower and deeper sell off was seen on worries on China's industrial profits. The National Bureau of Statistics reported that China's industrial profits dropped -5.2% in the first two months this year. Some of the largest metal products also reported slumping earnings. In the currency markets, Australian dollar is hit hard on it's close trade tie with and AUD/USD is possibly set to revisit recent low of 1.0336. Dollar is relatively steady against European majors.

There were some revived speculations about Fed's QE3 since Bernanke's comment on Monday. Bernanke commented on it again yesterday and said that Fed doesn't "take any options off the table" and is "prepared to respond to however the economy evolves." He noted it's "far too early to declare victory" on full recovery yet. And "it could still be a few more years" before unemployment returns to normal level. Meanwhile, Dollar Fed Fisher said that he doesn't believe US needs "further accommodation".

In Spain, the government announced that it had run a deficit of 20.7b euro in the first 2 months of the year. Revenue dropped to 34.8B euro, down -1.3% from the same period last year. The elections in Greece will be held on May 6. European Commissioner Olli Rehn said that “the current pace of reform and adjustment are far from sufficient to make Greece's public finances sustainable or close the competitiveness gap', suggesting the new parliament will be under pressure. In Ireland, the referendum on the fiscal pact will be held on May 31. Despite favorable polling result, the markets may be triggered before the outcome.

On the data front, euro zone M3 is expected to slow to 2.4% YoY in February. UK Q4 GDP is expected to be finalized at -0.2% qoq. German CPI preliminary reading will be released. From US, Durable goods orders are expected to rise 2.9% in February with ex-transport orders up 2.0%.