Surprisingly, given the force of the EUR's squeeze late in the European session, Asian trading was muted Wednesday. That said, the consolidation was at its highest since December 12 and there was a lack of interest to push risk currencies and the EUR back lower.

The EUR's rally was amid speculation Greek political parties were coming together to back the second Troika bailout package, with (another) meeting scheduled for today. The move was exacerbated by stops triggered above recent highs. EFSF's Regling commented that progress on talks was being made while Dow Jones highlighted that the ECB was willing to take less than the full value on its Greek bond holdings if restructuring talks are successful.

Latest schedules suggest Greek PM Papademos meets with the Troika (again) today while (another) Eurogroup meeting is being scheduled for Thursday. Any proposed deal would need to go through parliament on February 12 so, while there may be light at the end of the tunnel, it’s still a long tunnel.

The major event on the data front in Asia Wednesday was the release of Japan’s current account data for December, a topic that has received a lot of attention of late and while it produced a small rebound from the previous month, when compared with a year ago it painted a more gloomy picture. The surplus rose to ¥303.5 bln from ¥138.5 bln but was 74.7 percent lower than a year ago.
December’s data completed the picture for 2011 and showed Japan’s current account surplus falling to a 15-year low despite the income surplus widening to ¥14 tln.

In other currencies, AUD struggled to extend its post-RBA gains with heavy profit-taking orders capping AUDUSD above 1.08, despite moderately firmer gold prices.
CAD was a mild beneficiary of slightly higher oil prices and a sharp rise in building permits in December (up 11.1 percent m/m, a 4-1/2 year high).

In his testimony before the Senate Budget Committee Tuesday, Fed chairman Bernanke repeated his dovish take on the US economy, and was barely changed from the latest FOMC statement. He reiterated that we would see “exceptionally low levels for rates at least through late-2014” expecting below-target inflation through 2012/2013 and stating that the latest employment data understates the weakness in the labour market and anticipated it would take a long time before we see “normal” employment levels. He estimated that the economy would need to grow 2-2.5 percent and add 100-110k jobs each month just to stabilize the employment rate.

In an otherwise light data session, IBD/TIPP economic optimism improved to 49.4 from 47.5 while JOLT job openings also increased to 3,376 from 3,118. On the consumer side, consumer credit increased by $19.3 bln in December with demand for auto and student loans noted. Wall St edged higher in quiet trading with the DJIA rising 0.26 percent, S&P 0.2 percent and the Nasdaq +0.07 percent.


Data Highlights

  • CA Dec. Building Permits out at +11.1% m/m vs. 1.0% expected and revised -2.6% prior

  • US Feb. IBD/TIPP Economic Optimism out at 49.4 vs. 48.6 expected and 47.5 prior

  • US Dec. JOLTs Job Openings out at 3,376 vs. 3,250 expected and revised 3,118 prior

  • US Dec. Consumer Credit out at $19.308 bln vs. $7.0 bln expected and revised $20.375 bln prior

  • JP Jan. Bank Lending out at +0.6% y/y, as expected vs. +0.5% prior

  • JP Dec. Current Account Total out at +¥145.8 bln vs. +¥340.1 bln expected and +¥138.5 bln prior

  • JP Dec. Trade Balance – BOP out at -¥145.8 bln vs. -¥135.0 bln expected and -¥585.1 bln prior

  • UK Jan. BRC Shop Price Index out at +1.4% y/y vs. 1.7% prior


Upcoming Economic Calendar Highlights

(All Times GMT)

  • JP Economy Watchers Surveys (0500)

  • Swiss Unemployment Rate (0645)

  • GE Trade Data (0700)

  • US MBA Mortgage Applications (1200)

  • CA Housing Starts (1315)

  • US Fed’s Williams to speak (1540)