TODAY FOREX IN REVIEW

Markets more confident in the ECB's willingness to take action saw the Euro scream higher Friday as bond prices of struggling nations surged. CFTC data points to a dramatic shift from short positions to net long positions by traders as Euro positive sentiment coupled with dollar negative news produced a major squeeze higher in EURUSD. However, not all is well and fine with the ECB's new asset purchase plan as a decision is due later this week from the German Constitutional Court. European equity markets closed higher across the board, led by the 2.09% gain in the Italian MIB. The Swedish OMX and German DAX were also substantially higher, rising 1.17% and 0.66% respectively as investors shifted back to "risk-on" mode. Overnight EURUSD responded negatively, declining -0.23% to 1.2788 while GBPUSD has ticked down below the 1.6000 handle to 1.5995.

Data in the overnight session has been anything but pretty. The Chinese industrial production and export numbers both missed expectations. China however is in a sticky situation as inflation remains high while growth stalls. Interestingly we learned last week that in 2012 China has managed to import more gold than the entire ECB holdings. Gold hit a seventh month high, soaring following the new SMP plan and shows no signs of losing momentum, trading up at $1740.90. Japanese GDP figures came in disappointingly lower than expectations as the nation's recovery grinds to a halt. USDJPY has responded negatively, extending Friday's losses to 78.230while AUDUSD has slide -0.15% following the massive leg higher witnessed on Friday. Equity indices have proven mixed following the disappointing data, with the Hang Seng outperforming 0.19% while the Australian ASX and Nikkei are weaker -0.16% and -0.13% each.

As U.S. markets witnessed a sell-off into the end of the session following the disappointing NFP figures, sell-side banks are rapidly increasing their bets that Ben Bernanke will choose more easing in the next meeting. While the unemployment number dropped, the real story was the dramatic fall in work force participation (WFP) which hit a 31-year low. Employment dragged on equities which traded at multiyear highs following the advance ADP data. The S&P 500 rose 0.40% followed by a 0.11% tick higher in the Dow Jones. The Nasdaq underperformed peers, rising a modest 0.02%. The dollar index has rebounding 0.04% in trading today following one of the sharpest declines in recent months. Commodities have proven mixed with precious metals carrying over momentum while the energy complex weakens. Natural gas has fallen -0.71% to $2.663/MMbtu as WTI crude pares -0.16% to $96.27/barrel.

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