FOREX IN REVIEW

Sovereign bond yields of the Southern Eurozone fell dramatically yesterday following comments from Angela Merkel which supported ECB President Mario Draghi's "conditionality" for aid. The notion that a nation should first be required to meet certain conditions and take budgetary measures before the central bank can assist with reducing borrowing costs, stressing further political action instead of monetary policy tools. This was viewed by markets as German "rubber stamp" approval for further bond buying down the road if borrowing costs surge. The Spanish IBEX soared 4.05% followed by a 1.87% rise in the Italian MIB. Euro Stoxx 5o trailed slightly behind, gaining 1.08%. EURUSD was a major mover, climbing back above the 1.23 handle to 1.2371 before pulling back to 1.2345.

Asian stocks are ascending on the optimism that the ECB will resume asset purchases and evidence that the U.S. housing market is starting to rebound. Better data is seeing investors move from traditional safety instruments like Japanese bonds and back into risk-assets. The Yen has also continued to weaken with USDJPY marching higher to 79.370. Equity indices are on their way to a third week of gains led by the Australian ASX which has risen 0.69% in the overnight session. The Nikkei and the Hang Seng are both stronger, climbing 0.63% respectively. WTI crude oil has pared gains, falling -0.26% to $95.35 per barrel while meanwhile AUDUSD is also weaker, dropping -0.12% to 1.0498.

American markets were full of hope following the release of the building permit data yesterday coupled with signals that Spain will receive a bailout for banks. Housing permits for new construction rose to the highest level since 2008 however housing starts were below expectations. Unemployment claims also disappointed relative to estimates, but were relatively strong. Commodities and equities rallied off the news, with the Nasdaq Composite adding 1.04%. The S&P 500 rose 0.71% while the Dow Jones Industrial Average increased 0.65%, leaving major indices at 4-month highs. Agricultural commodities are mostly lower, led by losses in Coffee and Cocoa, falling -1.91% and -1.48% respectively. Wheat is relatively stronger, rising 0.48%.
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