It's been a difficult session for risk sentiment as New Zealand Prime Minister Key said he who would welcome a cut in the country's interest rates (which currently stand at 3.00%). The devastating impact of the recent earthquake in New Zealand's second largest city, Christchurch, is certainly going to have some impact on growth, and Key went on to say he would not rule out a recession in the second half of this year. On the data front, Australian Q4 GDP came in at +0.7% QoQ (as expected), but the year on year figure slightly disappointed at +2.7% (2.8% expected).
This sombre mood came on the back of yesterday's S&P comments that both Greece and Portugal remain on credit-watch negative, and that Greece's rating would hinge on the features of the proposed European rescue mechanism due to come into being in 2013, and indeed Greece's compliance with the terms of the existing EU/IMF rescue plan. The agency added that Portugal may have to resort to accepting EFSF and IMF funding, so clearly the rating would depend on the details of any such loans.

Meanwhile Eurozone PMI releases were good on the whole, with Germany, Italy, and France beating consensus expectations. German unemployment also fell to 7.3%, but the headline release was Eurozone CPI estimate which came in at 2.4% - in line with expectations but certainly well above the ECB's 2.0% target level.
Also yesterday the BoC announced their latest rate decision, and decided to leave policy rates unchanged as expected. The statement did not appear to indicate any near-term shift is on the cards, but policy makers did acknowledge improvements in the economic backdrop. Interestingly for FX traders, they also mentioned the challenges of persistent CAD strength, however we feel the effect of elevated oil prices will keep the CAD supported going forward.
US data releases were broadly in line with expectations but Fed Chairman Bernanke's testimony to Congress was lacking in surprises. Today the main event will be ADP employment data (market expecting 180k vs.187k previously) ahead of Friday's all-important non-farm payrolls and unemployment data.

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