FOREX IN REVIEW

Spanish banks have been the biggest borrowers of ECB funds over the last month, borrowing a record €375.5 billion. This situation has spiraled as Spain is now forging ahead to quickly receive crisis cash from the intended €100 billion fund to shore up banks that have no more quality collateral. Even though bond yields have fallen over the past several sessions, the yields are still unsustainable and the ECB will no longer lend against these very same sovereign bonds. European stocks closed mixed yesterday as the FTSE 100 led lower, dropping -0.54% while the German DAX and Swedish OMX lost -0.40% respectively. The Swiss SMI was stronger than European peers, rising 0.09% and the Italian MIB reopens later this morning after holidays yesterday. EURUSD has fallen back below the 1.23 handle to 1.2287.

Asian stocks have rocketed higher in the overnight session as new comments from Chinese Premier Wen Jiabao fuel speculation of further stimulus measures as inflation falls to a 30-month low. This drop off in inflation raises the prospect of further easing through more cuts to the bank reserve ratio. Sell-side banks have pulled back growth forecasts to below 8% as the Chinese economy expanded 7.8% in the first half of 2012. Risk assets across the board rose including crude oil which rose 0.16% to $94.48 per barrel. Major indices are higher, led by the 1.36% climb in the Nikkei. The Australian ASX and Hang Seng are also stronger, increasing 0.65% and 0.37% apiece. USDJPY has also overcome the major 79 technical level, trading as high as 79.210 before pulling back to 79.170.

A slide in the Empire state manufacturing index was more than offset by the gains in industrial production which beat expectations. Even though inflation figures missed forecast, it opens the door for further intervention and stimulus from the Federal Reserve possible. Equity indices closed mixed, with the Nasdaq adding 0.46% followed by a 0.11% gain in the S&P 500. The Dow Jones was marginally weaker, declining -0.06%. With risk attitudes mixed between Europe and Asia, uncertainty has been a boon for the dollar which has made continued, as DXY ticks higher to 82.710. Agricultural commodities have trailed off, led by losses of -0.63% in soybean futures and coffee as corn falls -0.44%, nearing the $800 technical level. Today's data is dominated by housing which will see new building permits and housing starts at 13:30 GMT.
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