Overall: The major currencies rallied against the dollar overnight with the only exception being the Japanese yen, which actually trades below the Asian open price. The rally seems to have been a reaction to the newly announced housing plan. The momentum carried over early in N.Y. but the Philadelphia Fed survey threw some cold water on investor's warm feelings.
In U.S. economic news, new claims for U.S. unemployment benefits were 627,000 last week, the same as the previous week, but the number of workers continuing to claim benefits rose by 170,000 to a record high 4,987,000. It was the fourth straight weekly increase to a new record in this measure.
Producer prices in the U.S. rose 0.8% in January following declines of 1.9% in December and 2.5% in November. For the year to January, prices decreased by 1.0% after decreasing by 0.8% in the year to December.
According the Federal Reserve Bank of Philadelphia, conditions in the region's manufacturing sector continued to deteriorate in February. The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, declined from a reading of -24.3 in January to -41.3 this month, its lowest reading since October 1990.
The Euro (Eur/Usd) rose overnight for the first time in the last five days. The pair gained almost 100 pips in the European session, bouncing off the 1.2550 support level. The pair fell 30 minutes after Wall Street opened, but traded in a narrow band thereafter with a base of support on 1.2670.
The Pound (Gbp/Usd) surged 170 pips in the overnight session, breaking above the 20-day simple moving average. Most of the moves came during the London open after a very weak Asian session. The pair declined sharply 30 minutes after Wall Street began trading but traded in an increasingly narrow band thereafter, finding a base of support on 1.4300.
In January, the M4 rose by £48.5 billion, or 2.5%, more than what analysts had predicted. Year over year, the M4 growth rate is standing at 17.5%. M4 lending excluding the effects of securitizations and loan transfers increased by £10.7 billion, seasonally adjusted in January. The twelve-month growth rate fell to 15.1% from 15.9% in December
The Aussie (Aud/Usd) rose 90 pips since the new trading day started, and it appears to be heading towards the 20-day simple moving average, the resistance area of the last few days of trading. The aussie’s calendar is clear of any reports for the remainder of the week. As with the euro and pound, the pair declined after Wall Street opened, finding resistance at 0.6485.
The Cad (Usd/Cad) fell more than 100 pips during the overnight sessions, breaking below TheLFB S1 (1.2530), where the pair topped one day earlier. The cad declined in N.Y. after the weekly report on oil inventories showed that supplies fell and demand for gasoline improved. Crude rose nearly 10% on the day after the report.
The Swissy (Usd/Chf) moved lower in the early part of Asian trading but by the end of the session it had surged higher, testing the 1.1800 area. However, during the London open the swissy started again to move lower, breaking below the low set in the Asian session. The pair was slightly higher in N.Y and looked to have established a support base on 1.1725.
The Zew Indicator for Switzerland, gauging analysts’ economic expectations, improved in February to -57.7, from -66.7 one month earlier. However, the indicator for the assessment of the current economic situation dips by 4.6 points to the minus 45.3 level. The Swiss trade balance surplus surged in January. Compared with the estimated number, the trade balance was released much higher, 2.03B versus 0.62B. In December, the report was revised slightly lower, to 0.00B.
The Yen (Usd/Yen) moved less than 40 pips in the overnight session, even though the S&P futures advanced, and the other major currencies rallied during the European session. Earlier today, the BoJ had their monetary policy meeting, but failed to influence the pair. The pair has been rising recently, which has puzzled traders, but the Japanese Ministry of Finance reported that in the latest week capital outflow to foreign bonds was a
net ¥1.4 trillion, the biggest since Oct 2005.
The Bank of Japan decided by a unanimous vote to maintain the Overnight Call Rate at 0.10%. Having the lowest rate amid industrialized countries, economists argued that the low interest rate will not provide strong enough relief to the Japanese economy, and that the central bank has mostly depleted its powers to influence the business cycle by using monetary policy.