FOREX IN REVIEW

FOREX IN REVIEW

ECB President Mario Draghi continues to be the center of attention ahead of this week's ECB rate decision and in light of his promises, the market has taken it to be a stall tactic while the EU awaits the German Constitutional Court. A member of the German coalition is threatening legal action against Draghi to prevent further sovereign bond purchases which Draghi outright denied as a possibility at the beginning of his tenure. Sovereign spreads have continued to tighten with the Spanish 10-year falling back below 7% and Italian notes just slightly above 6%. Stocks rallied higher, led by the 2.80% gain in the Italian MIB. The Spanish IBEX also increased, rising 2.78% followed by a 1.70% jump in the Euro Stoxx 50. EURUSD has also ticked higher, adding 0.20% to 1.2284.

The overnight session has shown mixed data so far as South Korean industrial production recorded a contraction while Japanese unemployment fell to 4.30% from 4.40% prior. Japanese manufacturing has also continued to rapidly slow as the PMI figures indicate a worsening retrenchment. China has announced further infrastructure spending in an effort to avert a slowdown with plans for further railway spending to the tune of $74 billion. Speculation of further central bank stimulus continues to boost equities as the Hang Seng strengthens 0.83%. The Australian ASX and Nikkei are also trading higher, advancing 0.74% and 0.51% respectively. NZDUSD continues to be a top performer after last week's run, climbing 0.23% to 0.8108.

As corn continues its record breaking run to the upside on further weather concerns, American equities slid lower in the lowest non-holiday trading volume witnessed in 2012. The Nasdaq fell -0.41% while the S&P 500 and Dow Jones declined marginally -0.05% and -0.02% respectively. WTI crude oil slipped back below $90 per barrel, trading at $89.92 per barrel while Gold has held relatively steady in the $1620-$1630 range. Both equities and commodities have been rising ahead of tomorrow's FOMC rate statement and subsequent comments with the expectations that Bernanke will announce further monetary stimulus. However, there is certainly the possibility that he will defer any comments until after the November presidential race to maintain policy that is independent of politics.
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