Asia was quiet as news flow stopped and traders cautiously eyed events in the Middle East. EURUSD traded between 1.3530-1.3609 while USDJPY 83.50-83.85. Regional equity indices were higher with the Hang Seng leading the way up 0.63% , which has set a positive tone for the European open. News that the planned crossing of two Iranian naval ships was postponed with no rescheduled date also kept participants from rushing into safe-haven trades. While the news flow from the Middle East has made lots of headlines the effect on FX prices have been limited. We suspect that barring a serious escalation, events in the region will continue to take a backseat to other core drivers (like the expected EU comprehensive solution & US economic data).

Singapore's Q4 GDP print came in weaker 3.9%, however, strong export numbers which came in at 20.9% vs. 15.9% exp, offset any potential negative sentiment, and continue to support growth acceleration in the region. In Japan, Reuter's Tankan DI improved for a second consecutive month in manufacturing to 14 from 11 while non-manufacturing jumped to 3 from -2.

The FOMC minutes suggested that downside risks have receded slightly, saying assessment of the most likely outcomes for economic activity and inflation over the projection period was not greatly changed. Fed members modestly lowered their unemployment and inflation forecasts (as expected) while keeping growth expectations unchanged. Overall there was nothing new in the report and will certainly not derail the current round of QE.

Meanwhile, the roller coaster ride continues for sterling traders. BoE Governor King verbally watered down theories of an early rate hike in his comments yesterday, stating some people are running ahead of themselves - a comment that triggered a broad GBP sell-off. He then added that any notion that the BoE might hike to anchor the public's growing inflation expectations was misplaced, saying the BoE is not in the business of futile gestures. While the less than hawkish minutes and comments from King caused sterling longs to unwind, we still see dips as buying opportunities.

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