Risk-sentiment crept in the markets ahead of reports which would show German industrial output increased and US small business confidence improved as the Dollar and the Yen weakened against majority currencies also as tensions in Egypt eased. EURUSD moved to a high of 1.3636 after declining to 1.3509 yesterday on weak German factory orders, USDJPY traded at low of 82.21, GBPUSD traded at a high of 1.6154, strengthening for the first time in four days after data showed increase in retail sales and improvement in the housing market, AUDUSD traded at a high of 1.0157 and AUDJPY traded at a nine-month high of 83.53 as expectations for further job additions while unemployment still remains unchanged at the lowest since Jan. 2009, are adding strength to the currency.
The MSCI Asia Pacific index rose 0.1%, S&P 500 futures reached at the highest level since June 2008 to 1316, Nikkei rose 0.4% on improved earnings and outlook from the US economy while Hang Seng dropped 0.46% still weak on Chinese tightening policy measure concerns. Asian currencies were stronger on positive economic numbers and a weak Dollar and South Korea is poised to increase rates by 0.25% to 3% on Feb.11. Financial shares gained after National Australia Bank Ltd. reported an 18% increase in Q1 2011 profit and Deutsche Bank AG raised its rating on Asian banks.
Looking at the day ahead, German industrial production probably increased 0.2% (prev. -0.7%) while US small business confidence probably increased to 94 (prev. 92.6) which are keeping the risk-appetite strong among investors and markets will be on the watch for any sudden shifts in data. Earlier today, UK retail sales rose 2.3% (prev. -0.8%) while home prices fell -31% (exp. -38%) which is being seen as an improvement in the UK economy and is helping the currency to remain strong today and Australian business confidence rebounded to 4 from a 19-month low of -3on optimism the economy will recover from the flood devastation. Also, Japan's current account surplus widened 30.5% to $14.5 Billion last month as global recovery boosted demand. Exports increased 14% and imports increased 12.8% which has helped in the wide surplus data.
Swiss unemployment data, German industrial production form part of the European session while we would see US small business confidence report and Fed's members Lacker, Lockhart and Fisher are due to speak today which could move the markets depending on their stance on the current QE2 measures and the view for the subsequent quarters with the effect mainly seen on the US Dollar.