Market Brief

The Usd was firm in the Asian session, despite yesterday's strong bout of risk aversion. Markets saw heavy USD, Gold and Treasury buying and equity selling. The EurUsd was perhaps the biggest loser in the FX market dropping from 1.2810 to 1.2563 day lows. The main cause of the negative sentiment was the markets renewed focus on European credit rating (due to Moody's warning of ratings reviews) on corporate side in European banks and sovereign side, specifically Ireland. However, some relief was supplied today as a few European banks posted higher than expected profits, providing a short reprieve in Euro selling. President Obama will be launching his initiative to halt bank foreclosures, but due to the markets fatigue we don't expect a significant decrease in risk aversion.

In Australia, December's retail sales rose by 0.8% q/q, but below market expectations of +1.0%q/q. Weakness was skewed to discretionary spending, with large drops in cafes and restaurants spending,-1.5%q/q, -7.4%y/y.

In the European session, the market will be focused on the BoE MPC minutes release and UK CBI Industrial Trends Survey. The minutes are likely to show that all members wanted to cut rates by at least 50bp. What will be interesting will be any revolution on why the members voted for only 50bp cut when the Inflation Report clear stated deeper cuts were needed. Due to the recent drops in manufacturing, the more timely CBI survey will capture the markets attention and deserve very close examination.