Focus remained on Oil's climb to $102 as Libyan forces bombed certain cities which control oil production and protests have reached Iran. Also, ADP Employment data from the US rose 217,000 beating forecasts which could add to the positive sentiment growing ahead of tomorrow's Non-farm payroll data. Manufacturing indices from Germany, EU, UK and the US showed considerable signs of growth which could have more impact on oil prices as demand could increase from these nations. Fed Chairman Bernanke testified yesterday and said that he did not rule out any possibility of a QE3 if conditions deteriorate after the QE2 expiration at the end of June. He said that risks of a rise in unemployment have subsided and any withdrawal of stimulus is linked to improvement in labor market along with inflation control within the levels expected by the Fed.
EURUSD moved higher to 1.3875, a shade below the 1.3900 resistance levels on ECB rates outlook when policy makers meet today to discuss rising inflation levels and as retail sales advanced 1.4% MoM and 2.6% YoY, AUDUSD declined to 1.0143 as home-building approvals declined 15.9% and exports declined 4%, NZDUSD dropped to 0.7421 on expectations of RBNZ rate cut this year on rebuilding costs hampering economic growth, USDCHF traded at highs of 0.9264 while remaining supported above 0.9228 levels as the Franc gained on demand for safety earlier in the morning on rising oil prices slowing down recovery, USDJPY moved to 81.93 highs on Dollar strength, GBPUSD gained to 1.6333 highs on expectations of rising inflation levels bringing in rate hikes by the BOE and as house prices improved.
Service sector data from Germany, EU, UK and the US, EU GDP figures, Retail Sales, US initial jobless claims form majority of today's economic data with the most important news being ECB's rate decision followed by ECB President Trichet's press conference where we expect him to address the oil price effect on inflation and any future action by policy makers for any signs of interest rate hikes or bond-purchases. Also, there have been talks of Portugal needing bailout money and if Trichet can quell those fears, we can see the currency moving higher towards the 1.4000 psychological levels.