New York Open: Risk Rallies Ahead of Eurogroup Meeting

is lower across the board as risk appetites gets a boost following China’s 50bp cut in its reserve requirement ratio (RRR) and as Euro zone finance ministers meet in Brussels. The PBoC joins major central banks in taking a more accommodative stance which is supportive of the risk rally and puts pressure on the USD. U.S. stock markets are closed for Presidents Day and there are no economic data releases today out of North America. As such, the market will be focused on headlines out of the meeting of European finance ministers to dictate price action. The Dollar Index is significantly lower with a break below its daily ichimoku cloud and Tenkan line. This is the first time it has traded notably below its cloud since late October and suggests the potential for further declines. The buck is weakest against the Scandies followed by other European currencies and then the commodity block.

• EUR is mostly higher on optimism that a Greek deal can be reached today and as China’s RRR cut supports overall risk sentiment. The euro is strongest against the USD (currently higher by about +1%) and is softer against the SEK and NOK. Sovereign yield spreads are broadly lower and European equities are higher with the DAX currently up about +1.38% and Euro Stoxx 50 up around +1.12%. EUR/USD has surged towards the top of its recent range and currently trades around 1.3270. It is approaching the key 100-day SMA which comes in just above the 1.33 figure. EU finance ministers are meeting shortly and markets remain hopeful that an agreement can be reached on Greece. Greek Fin Min Venizelos said that Greece is ready to conclude the second aid deal and PSI while Germany’s Schaeuble says that

• JPY continues to decline as BoJ Governor Shirakawa says the bank will continue with strong monetary easing as it has set a clear stance with its inflation target. He spoke after more disappointing economic data out of Japan with the January trade deficit widening by more than expected to -¥1,475.0B from the prior -¥205.6B (cons. -¥1456.3B). USD/JPY rallied to nearly 79.90 before correcting lower to about 79.50 at time of writing and EUR/JPY rose to session highs of around 105.70/75 and currently trades around 105.40.

• CAD mostly weaker against the G10 currencies but stronger against the USD and JPY. USD/CAD made new lows for 2012 as the greenback fell and as oil continued to advance on Iran tensions. Latest reports indicated that Iran will halt oil exports to the U.K. and to France. This sent WTI higher, briefly trading above $105/barrel. The Loonie strengthened against the USD to just above the 0.99 figure before rebounding to current levels of around 0.9930. Canadian stock markets are closed today and there is no economic data due out of Canada.