London Session

The pendulum of risk continued to swing and made for a pretty mixed London session.
Euro was tossed around as better economic data initially put a bid under the common currency while an earnings disappointment from a major global machinery manufacturer in the latter part of the session saw risk trades come under pressure once again. This ultimately left the safe haven US dollar well positioned to extend gains as we head into the NY session.

The German ZEW survey of economic sentiment blew away market expectations and printed a 13.0 read for April after a -3.5 result the prior month – the highest since June 2007. This indicator tends to lead German economic activity rather well and the fact that it looks to be carving out a bottom proved to be a brief shot in the arm for euro. EUR/USD rocketed to the 1.2990 overnight highs on the news but has since seen its gains evaporate on news that a global machinery manufacturer reported much worse than expected 1Q earnings. So the return to risk aversion that plagued the euro yesterday seems to be back in play. The grind lower should find support now into 1.2880 and 1.2830 next.

The Bank of Canada rate decisions now kicks off the NY session at 9am ET and the market is looking for no change to the current 0.50% target. The market forecast is contentious with multiple economists looking for a -25 basis point cut, so we would expect some fireworks in USD/CAD no matter what the rate decision is. Rate cuts at this point are more likely to be viewed as panic moves as rates are already so low that any further reduction would likely have little impact on the broader economy. Thus look for CAD to come under pressure on any surprise cut.

US Treasury Secretary Geithner is set to testify before the Congressional Oversight Panel at 10am ET and we would not be surprised to see some market moving nuggets come out of this as well. More headlines concerning the dubious bank stress tests would undoubtedly not be good for risk, but the US dollar would benefit from the flight to safety once again.

Upcoming Economic Data Releases (NY Session) expected prior

• 4/21 12:30 CA Wholesale Sales MoM FEB 1.00% -4.20%

• 4/21 13:00 CA Bank of Canada Rate 21-Apr 0.50% 0.50%

• 4/21 13:00 EC EU's Juncker Gives Speech in Luxembourg

• 4/21 13:30 US Fed's Hoenig Testifies Before Joint Economic Committee

• 4/21 14:00 US Treasury Secretary Geithner Testifies Before Oversight Panel

• 4/21 17:30 GE German Finance Minister Steinbrueck Gives Speech in Berlin

• 4/21 17:30 EC ECB's Papademos Speaks to EU Parliament

• 4/21 21:00 US ABC Consumer Confidence 19-Apr -50 -51