Opening Comment 02.12

The simple proclamation from the EU of a unified support to Greece has not been enough to infuse any real confidence in the single currency, which seemingly remains locked in a holding pattern until additional information and details are disclosed.

Some have been very discouraged by a UK Guardian report that German Chancellor Merkel displayed a stiff resistance to the idea of a Greek bailout at yesterday’s EU Summit meeting. The commodity currencies have been the star performers in recent sessions, as higher global equity prices and recovering commodities help to direct much of the interest in the FX markets towards the higher yielding plays.

The overnight news that Chinese steel mills have reportedly agreed to a 40% rise in iron ore prices for the upcoming year, has been seen generating additional bids in these currencies. While the Australian Dollar has been a big story, following the much stronger than expected unemployment data the other day, relative performance in both Kiwi and Cad has also been impressive. Nevertheless, Kiwi has given up ground on Friday, on the back of the latest REINZ data which shows more strain on the local housing market, along with the release of a much weaker than expected monthly retail sales print. Elsewhere, the IMF’s top economist has said in a WSJ interview that central banks should consider aiming for a higher inflation target in normal times in order to be well positioned for proper monetary policy adjustments in times of economic stress. Other data released in Asia has included Japanese consumer confidence which managed to rebound in January.

Looking ahead, German GDP (0.2% expected) is due at 7:00GMT, followed by Eurozone GDP (0.3% expected) and industrial production (0.1% expected) at 10:00GMT. US equity futures trade flat, while commodities are also showing offered. All currencies trade in a very tight range on Friday thus far. The Yen is the strongest currency and tracks slightly higher against the buck, while all other major currencies are marginally lower, with the Euro underperforming.

[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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