Market Briefs

• US Feb Housing Starts 698k vs. 706k (revised from 699k), expected 700k
• US Feb Building Permits 717k vs. 682k, expected 690k
• Fed Bernanke: lessons of history is that central l banks should not move too quickly to reverse monetary accommodation after deep recession, gold standard not feasible
• Fed Powell: regulatory system must do better, Fed can’t shrink balance sheet too quickly and snuff out recovery
• Fed Stein: don’t want to unwind assets in way that surprises market
• Trsy Geithner: US looking “aggressively” to “take advantage of lower interest rates,” EU lags US on derivatives regulation, countries that can support growth should do so in order to help indebted European nations, China’s yuan has risen but still undervalued, welcomes Saudi statement that they will take further action to increase oil supplies (Rtrs)
• Saudi oil minister: 2.5mln bbls per day of spare capacity, current supply disruptions miniscule, oil tanks are full, market better supplied than in 2008
• Republican Ryan sets out GOP budget, Democrats say Ryan budget reneges on August deal (DJN)
• US accuses China of illegally subsidizing certain solar energy products (DJN)
• US State Dept: 12 additional countries are importers of Iranian oil and may be subject to eventual US sanction (Rtrs)
• Brazil freezes extra BRL368mln in discretionary spending in 2012 budget
• Brazil may pay down $15bln in overseas debt to contain forex (DJN)
• Magnitude 7.6 earthquake hits near Mexico City (DJN)
• BOE Dale: UK CPI inflation just as likely to be above 2% as below in medium term, inflation likely to remain elevated this year due to oil and weak productivity, pace of recovery likely to remain weak (Rtrs)
• German Fin Min: EU wide financial transaction tax unlikely (DJN )
• Italy’s Monti: all unions accepted govt’ proposal to ease firing rules except CGIL, will fine tune proposals over next two days
• ECB Makuch: there are good signs on economy, rumors of ECB dispute on exit strategy are wrong
• ECB Praet: harder for banks to profit from lending, money supply extremely weak, central banks need more info on counterparts, price stability is not sufficient for central banks, very tough restructuring is going on in banking sector
• Fonterra: whole milk prices drop 2.6% at latest auction, TWI down -4.5%
• Glencore to buy Canada’s largest grain handler for $6bln 

Looking Ahead - Data

• NZD 21;45 Current Account
• jpy 04:30 Jan All-industry activity

Looking Ahead – Events, Other Releases

• JPN --:--   Government releases monthly economic report
• JPN --:--  BoJ Governor Shirakawa visits Fukushima City, no press conf scheduled

Currency Summaries
EUR/USD  opened NY by 1.3202, 40 pips off last night's close, today's NY range 1.3172/1.3253, close 1.3220. The focus is clearly off Europe and on the US presently; US data was slightly disappointing, ICSC chain store sales +0.9%, +3.3% y-on-y; housing starts -1.1%, 698k vs 700k f/c; building permits +5.1%, 717k vs 690k f/c, Redbook sales +0.4%, y-on-y +3.6%. Consequently US stocks were trading -0.73/-0.52% at noon, closed the session -0.52/+0.16% after headlines that Italy's Monti says the unions have all accepted new government dictates on firing rules except CGIL; he hopes to have details within the next two days. Dovish comments from Bernanke also took their toll on the Dollar and left EUR/USD bid into the close despite "risk off" in stocks and commodities. The early market driver was BHP-Billiton's president Ashby's  f/c iron ore demand will soon hit "single digits if not already there" citing slowing demand in China and slow global growth. Aussie dropped 1.2% today but EUR held in, rallied on the crosses, a big EUR/CAD buy order helping the pop to NY session highs
USD/JPY opened at 83.72 with CBs, macros, and real money all cited as USD buyers. There was also reminders that bids remain between 82.80/83.10. US housing starts were less-than-stellar reinforcing a risk-off sentiment into the NYSE open. Broad USD selling followed the equity market open as US yield edged lower. Similarly, oil prices slipped marginally on expectations of Saudi supply (Geithner comments). USD/JPY sliced through stops hitting a 83.30 low after option expires (83.50) EUR/JPY buyers reemerged at the 110.26 low leading the cross higher into the London close. Bank shares stayed in positive territory for most of the day. EUR/JPY high of 110.67 was set after Bernanke headlines about not taking toe foot off the gas too soon. There was also Nikkei headlines about DPJ making a sales tax hike contingent on growth. USD/JPY settles at open; oil -2.2%, offers stacked 83.80 to 84.00 with 84.10 stops. EUR/JPY barriers at 111.00 and every 50 pips above there.

GBP/USD UK inflation was stronger than forecast (CPI +0.6 m/m% vs. -0.5%, +0.5% expected; RPI +0.8% vs. -0.6%, +0.6% expected) which gave sterling a bit of a lift, but not much. That was followed by the CBI orders book fell to -8 from -3, with -6 called. GBP/USD spent the day chopping between about 1.5840 and 1.5880, in line with a mainly stable dollar. EUR/GBP was more choppy, swinging down to 0.8315, then up to 0.8350. In the end, though, the cross finished about where it started European trading in the middle. Today's GBP/USD retracement is not a major issue in the grand scheme of things. It's producing an inside day, which is an indication of consolidation. That could eventually turn into a reversal, but that's not the reading straight off. The fact that the market found support in the upper area of the range which range from late Friday through much of Monday is a positive. We like the prospects for a test of the late-February highs.
USD/CHF A major improvement in Swiss IP in 4Q gave the franc some background support in an otherwise consolidating session. IP rebounded 7.9% q/q vs a 2.6% rise expected and 1.9% drop last,. Orders were down 2.0% y/y vs a 4.8% y/y drop in 3Q. All eyes are now on the Trade and KOF data from Feb and Mar on Thur and Fri to see if last week's dreary GDP and CPI forecasts by SECO may have been too downcast. The IMF's annual Article IV review again took exception to the SNB's 1.2000 EUR/CHF floor, noting the SNB should let it float once inflation and growth return. Riskies are pricing in some EUR/CHF upside this week, but we doubt the SNB will touch the floor, except to maintain it, until late in the year at the very earliest. Mediocre US Housing data, more cooing from Bernanke and fresh pangs of uncertainty about China and other EM growth stories kept USD/CHF in a range roughly between Monday's and Friday's lows. EUR/CHF is back to being chained to the 21-DMA at 1.2060 as vol disappears. Politician Blocher, who went after Hildebrand last year, is now in legal probe over a possible bank secrecy law breach.            
USD/CAD   opened the Noram marts 0.9917 having closed last night by 0.9872 and working a 0.9865/0.9918 range overseas. AUD collapsed overnight (-1.19% vs USD presently) after giant Aussie miner BHP-Billiton's president Ian Ashby  forecast iron ore demand would soon "hit single digits if it's not already there"  (Reuters News) and referred to dropping demand in China. Commodities got shellacked, copper closed -1.85%, zinc -1.62%, gold -0.65%, silver -3.4% and WTC oil -2.23% (settled $105.66) USD/CAD was paid up at 0.9968 in morning trade as USD/CAD & EUR/CAD moves triggered stops in EUR/CAD, however it was a spike move and USD/CAD settled down to 0.9925/50 before sliding back to 0.9909 given late in the day as US equities held, close 0.9917.
AUD/USD opened in New York at 1.0485. Spot traded a relatively narrow range for most of the day though it seemed heavier than it actually was due to heavy selling (US banks) in early London (China talk). Commercial and real money buyers mixed with macro take profits in GBP/AUD and AUD/NZD . Shorter term models were generally USD sellers after the NYSE open despite US IB forecasts for slower US growth numbers ahead. The AUD/USD 1.0457 low was linked to GBP/AUD breaking above its Ichimoku cloud at 1.5127 and EUR/AUD buying ahead of option experies. GBP/AUD settled 1.5130 thanks to bank share outperforming, once again, while oil shares and metals were crushed. Oil was doused by Saudi comments about plenty of supplies.AUD/USD settles 1.0479 with option bids at 1.0450, stops 1.0440, and commercial buyers around 1.0430. CRB -1.2%, oil -2.2%, gold -$17. 1.0403 200 day MA, 1.0400 barrier, and US money center target 1.0350 remain targets if spot fails to bounce past 1.0510/50 area. Profit taking could ensue in EU crosses on any sign of Asia share recovery.
NZD/USD  opened in NY at 0.8174 having set a 0.8212 high earlier in London. Spot came under pressure ahead of a weak NYSE open as macros, models, and CBs bought GBP and EUR crosses vs. Asia. NZD/USD marked a 0.8140 low and bounced back sharply as the USD came under broad pressure. A macro scooped up AUD/NZD midstream helping spot move to 1.2845 by the London close. NZD/USD was guided by improving risk appetite ahead of the Bernanke comments with banks leading the way. There was talk of a "missed hit" or large EUR/NZD order around an 1PM fix sending NZD/USD to a 0.8133 low. EUR/NZD high was 1.6254  - highest level since Jan 10. Fonterra announced that milk prices fell 2.6% at latest auction and TWI was down 4.5%. NZD/USD settles 0.8170 ahead of NZ current account numbers. A technical bounce is possible vs. crosses. 0.8192 55 day MA is resist. with 0.8087 200 day MA as targeted support.
LATAM  The most actively traded regional ccys put in a mixed shift vs USD today. BRL +0.07% vs USD at 1.8194, CLP -0.35% at 484.20, MXN -0.25% at 12.6620. Regional Bourses head closed lower, the Bovespa -0.64% to 67,294.38, the Chilean IPSA -0.64% at 4614.38, the Mexican Bolsa (IPC) -0.53% to 38,055.27. US marts closed -0.52/0.16%. US data; ICSC chain store sales +0.9%, +3.3% y-on-y; housing starts -1.1%, 698k vs 700k f/c; building permits +5.1%, 717k vs 690k f/c, Redbook sales +0.4%, y-on-y +3.6%.