Expectations that this week's US payrolls data will show a positive number are consistent with the perception that the risk of a double dip recession in the US continue to dwindle.  The improvement in the appetite for risk is reflected in the fact that stocks market indices across the Americas, European and Asia have, with just a few exceptions, pushed higher this quarter.  Strengthening risk appetite is also evident in the pressure on the JPY.  In December last year the decision by the BoJ to provide a 0.1% JPY10 trn in emergency credit coincided with a better than expected US payrolls report and had the effect of stirring expectations of diverging US-Japanese interest rate differentials and pushing USD/JPY higher.  This month, the BoJ extended their lending facility.   Insofar as the market is priced for a solid gain in March payrolls data, USD/JPY is reacting to a similar set of conditions; with the jump in US yields after last week's poorly received t-note auctions having provided the trigger.   JPY weakness is being seen across the board.  CAD/JPY is breaking above levels that have held since October 2009 and AUD/JPY is close to pushing back to its 2010 high.  Insofar as the most recent CFTC data highlighted the crowded short positions held in both EUR and GBP it is not surprising that both EUR/JPY (currently near a 8 week high) and GBP/JPY have also been squeezed higher despite the lack of clear improvement in the fundamental positions of either the UK or the Eurozone.  These moves have helped lead both EUR/USD and GBP/USD higher this morning.

The Greek-Bund 10 yr yield spread has widened to over 340 bps this morning.  The Greek Debt Office this morning clarified that it has a funding requirement of EUR11.6 bln for May and EUR 32 bln for the rest of the year.  The re-opening of a 20 yr bond yesterday was explained as a technical operation.  However, since the Debt office raised far less that the EUR 1 bln of paper that was on offer, negative conations can be drawn from that sale.  Clearly last week's EU support mechanism has failed to have the desired impact of reassuring markets.  Investors are continuing to demand a premium to hold Greek debt and since this is incompatible with the need of Greek to keep its funding costs down, the Greek government may still stumble into a funding crisis later this year.  This worry should alone be sufficient to prevent the EUR from a concerted turn around vs the USD in the months ahead.  Adding to the EUR's woeful outlook is the news that Irish banks face a capital shortfall of up to EUR 32 bln this year.  That said, German unemployment data this morning provided some good news; seasonally adjusted jobless in March fell by 31K.  EUR/USD climbed to a session high of USD1.3473 this morning aided by the upside pressure on EUR/JPY.

The squeeze higher in GBP/JPY and some quarter end positioning led cable to an intraday high of USD1.5174 this morning.  March Gfk consumer confidence data fell to -15 in March highlighting expectations of tough times ahead for the UK economy irrespective of who wins the general election.  

What started out as a good session in Asia for the AUD soured on the back of poor Feb retail sales (-1.4% m/m) and weak Feb buildings approvals data.  These numbers reinstated the perception that the RBA may wait a few months before hiking rates.  The CAD was better positioned to draw support from the sold tone of commodities prices.  USD/CAD hit a session low of CAD1.0152.  
Canadian Jan GDP, US ADP data, Chicago PMI and US Feb factory orders are all due this afternoon.  
Jane Foley