Forex News and Events:
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Risk appetite improved throughout yesterday, pushing EURUSD higher. Overnight EURUSD traded in the range 1.2955-1.3048 booking a 0.6% gain and USDJPY was range-bound between 89.33 and 89.68 – down by 0.1%. The dollar was weaker on a whole, declining against 7 of the 10 most traded currencies.
The general improvement in sentiment had been building during the day as fresh fiscal stimulus packages were announced in Australia and Sweden, and the BoJ which indicated its intention to purchase stocks held by Japanese banks. In the US, better than expected economic data, and quarterly earnings reports that were not as bad as had been feared gave risk appetite a further lift. The Nikkei 225, HangSeng and Shanghai Composite all booking between 2.2 and 2.7% gains in today’s trading.
Ahead today, the confirmation of January's services and composite PMIs for the Euro zone will be out, and Euro zone retails sales is expected to show a further decline of 0.2% on the month. The market will continue to look for ECB commentary which may hint at a softening of tone ahead of tomorrow's rates decision. In the U.S Challenger job cuts survey (12:30 GMT) and the ADP employment report (13:15 GMT) will be out and the market may look to the two reports for some early directional indications of Friday's non-farm payrolls number, though the forecasting accuracy of either survey has often been questioned in the past.
Another story that has all of our attention is this talk of an HIA (Homeland Investment Act) bill being passed by the Senate Finance committee. If this bill passes it could give the USD a boost. In 2005 more than USD 200bn was repatriated. The BEA’s balance of payments data suggest that there could be as much as USD1000bn that could be repatriated. US firms have kept unusually high proportions of foreign dividends since 2005. A quick informal sampling of firm’s financial accounts also suggests that most firms have as much as or more abroad than they had in 2004 when the first bill was passed.
