OPENING COMMENT
While it has been a story of consolidation for most of the major currencies overnight, Sterling, Aussie and Kiwi continue to strengthen against the buck. The pound has been a monster over the past 24 hours, with the single currency outperforming across the board on the back of a higher degree of confidence in BoE monetary policy, while Aussie and Kiwi have rallied to fresh 2009 highs yet again by 0.8275 and 0.7500 respectively. The antipodeans have shined as the global economy recovers, with widening yield differentials, and strong risk appetite driving demand for these currencies. The latest hawkish comments from RBA Stevens and firmer inflation data out of New Zealand have accelerated the gains. New Zealand’s ASB Bank has even made a move today to raise its mortgage rates, another signal that rates in the economy may have bottomed. Elsewhere, Germany’s Wise Men have warned that the pace of economic recovery is “unsustainable” and that the country’s banks may face a fresh crisis over the next year. George Soros on the wires overnight saying that the world currency arrangements are fraught with danger and that global regulation is needed. The Yen has been offered on the day and underperforms with the currency potentially at risk for a pullback in the event of a major USD corrective rally, which many have been anticipating. Analysts have cautioned that the DJIA move to 10,000 should be not be trusted, and this could prompt some renewed Yen buying as risk aversion sets in. Nevertheless, for the time being at least, US equity futures still point to a higher open, while commodities are mixed. Looking ahead, the European calendar is light with the only key releases coming in the form of Swiss retail sales (0.8% expected) at 7:15GMT, and Eurozone trade balance (2.5B expected) at 9:00GMT.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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