• USD: Lower, equities and commodities rally, risk appetite improves on Greek rescue rumors
    • JPY: Lower, tracking equities and selling in cross trade
    • EUR: Higher, Greek rescue speculation and technical bounce on record net spec short on the IMM
    • GBP: Higher, trade balance widens, retail sales decline, house prices rise
    • CAD and AUD: AUD & CAD higher, improving risk sentiment, reduced Australian budget deficit forecast

    Overview

      USD traded lower Tuesday pressured by Greek rescue speculation. A report that ECB President Trichet would  return one day early from a BIS meeting in Australia to attend an EU Council Meeting fueled speculation that a Greek bailout plan may be soon announced. The EUR traded at an eight-month low versus the USD late last week pressured by concern of sovereign debt default risk in Greece. Today's speculation of Greek rescue plan sparked an improvement in risk appetite, rebound in equities and commodities prices and selling of the USD. The latest rumor is that a €20bln Greek bailout plan may be soon announced. EUR gains were limited by a statement from the ECBs Nowotny that ECB can't bailout Greece because bailout of governments is not part of the ECB charter. The USD decline may also reflect technical factors which include last week’s CFTC commitment of trader’s report which said that spec short EUR position on the IMM was at a record high. This may be an indication that investors were getting too bearish the EUR and the EUR may have reached oversold technical conditions. In reaction to the sharp increase in EUR short positions economist Stiglitz called on Europe to teach speculators a lesson. Short covering was the main driving factor for today's EUR trade. GBP traded higher but underperformed in reaction to report a weaker UK retail sales and new election polls which suggest the risk of a hung parliament. Commodity currencies traded higher tracking the improvement in risk appetite and higher commodity prices. AUD was supported by report that Australia’s fiscal budget deficit for 2009/10 may be 15bln less because of stronger than expected growth and hawkish comments from RBA Governor Stevens. Stevens warned that keeping rates to low for too long may make it harder to prevent asset bubbles. JPY traded lower pressured by improving risk appetite. US economic data was mixed with wholesale sales rising and inventories falling. Focus turns to Wednesday's testimony by Fed Chairman Bernanke before the House on unwinding of liquidity measures. The WSJ reported Monday that Bernanke will lay out a plan to raise rates as the economy improves with the first focus on the interest rate on excess reserves. Main focus for FX trade remains risk sentiment and debt default risks in peripheral European countries, Greece, Spain, Portugal, and Ireland.

      Today’s US data:

      December wholesale inventories dropped by 0.8%, a 0.5% rise was expected. Wholesale sales rose by 0.8% a 1% rise was expected.

      Upcoming US data:

      On February 10th December trade balance and the Treasury budget will be released. The trade balance is expected at -36.5bln compared to -36.4bln last month. The Treasury budget is expected at -60.5bln compared to 63.5bln last month. On February 11th initial jobless claims for week ending 02/06 will be released expected at 470k compared to 480k last week. January retail sales and December business inventories will also be released on February 11th. The retail sales are expected to rise by 0.5% compared to -0.3% last month. Inventories are expected unchanged at 0.4%. On February 12th February University Michigan consumer sentiment will be released expected 74 compared to 74.4 last month.