NY Session: A Brief Respite for the Euro

The USD is weaker across all of the G10 today with exception to the NZD as risk sentiment has slowly improved over the past 24-hours. It initially began with stronger than expected sovereign bond auctions out of Italy and Spain and then continued throughout the BoE and ECB interest rate decisions. However, data out of the U.S. was clearly a sore spot as Dec. Retail Sales, weekly jobless claims, Nov. Business Inventories and Dec. Monthly Budget all disappointed. This initially saw equities falter, however they quickly made an about face as the S&P500 rallied over 10 points thereafter to close at its highest level since July of 2011 – The Dow Jones Industrial Average finished higher by about +0.17% and the S&P 500 rose by around +0.23% on the day.    

In FX, the BoE and ECB both left rates unchanged earlier today at 0.50% and 1.00% respectively. While the BoE was essentially a non-event, the ECB had a bit more color. In his testimony Draghi said that he saw ‘tentative’ signs of the EU economy stabilizing, and also stated that the ECB’s work is already ‘under way’ on collateral for the next LTRO offering. Furthermore, Draghi said the ECB had no discussions regarding cutting the deposit or marginal rates at this meeting. Consequently, this saw the Euro rise across the board, breaking back above 1.28 to test the 200-hour and 38.2% retracement of the recent decline around 1.2825/30. There was also a lot of action in the EUR-crosses as EUR/NZD rose nearly 150 pips at one point before slowly backing off as well as notable short-squeezes in many of the heavily shorted EUR/commodity linked currencies over the past few weeks. Even EUR/GBP saw a sizeable pop, breaking above the 21-day sma for the first time in over a month, and looks poised to make a run towards the prior highs near 0.8420/25.

Elsewhere, precious metals partook in the USD decline as Gold rallied +0.48% and Silver is higher by about +0.81%. Even oil was along for the ride until headlines about a potential EU oil embargo on Iran was delayed by six months. Subsequently, this sent oil reeling with US Oil (WTI) to trade back below $100 for the first time in 2012 and ended up finishing lower by around -1.81% on the day. Another interesting development came around 3pm ET when the White House sent Congress a request to increase the US debt ceiling (yet again). This was part of the debt agreement reached in Aug. and starts a 15-day time period in which Congress must vote on the measure (House is scheduled to vote on this on Jan. 18th while the Senate first returns on Jan. 23rd).

On the data front for the upcoming Asia/Pacific session is the release of Japan Dec. M2 & M3, Japan Dec. Bankruptcies and New Zealand December REINZ House Price Index and Sales.