Daily FX & Market Commentary: Strength On Wall Street Lifts S&P 500 Above 1,500

Daily FX Commentary: (Morning Report)

EUR/USD 

No changes in the near-term price action seen in past couple of sessions, as the pair remains in a sideways mode, entrenched within narrowed 1.3264/1.3370 range. Studies on 1 and 4h charts hold neutral mode, with break of either side to signal fresh direction, however, clearance of the wider range boundaries at 1.3255 and 1.3400, is required to confirm. 

Res: 1.3350, 1.3370, 1.3386, 1.3400 
Sup: 1.3300, 1.3280, 1.3264, 1.3255 

GBP/USD 

Cable holds 1.5800/1.5900 in past three-days, after finding temporary ground at psychological 1.5800 level. However, near-term tone remains aligned to the downside, as recovery attempts were capped under initial 1.5900 resistance, by descending hourly 20 day EMA and Fib 38.2% of 1.6038/1.5801 descend. Improvement of the near-term structure required break above minimum 1.5950, Fib 61.8% and 55 day EMA, to avert immediate downside risk of losing 1.5800 handle that may accelerate bears towards 1.5750 and 1.5700. 

Res: 1.5851, 1.5882, 1.5891, 1.5900 
Sup: 1.5811, 1.5801, 1.5753, 1.5700 

USD/JPY 

Bounce from 88.00, where the price find support, reduces downside pressure, as gains through psychological 89.00 barrier, retraced over 61.8% of 90.23/88.05 fall at 89.44. Improved hourly structure sees potential for stronger recovery, however, still weak studies on 4h chart, require regain of 90.00, to confirm recovery and re-focus 90.23 peak. Psychological 89.00 level now offers support and is reinforced by 4h Ichimoku cloud top and 20/55 day EMA’s bullish crossover, with break here to weaken the structure. 

Res: 89.44, 89.72, 90.00, 90.10 
Sup: 89.00, 88.87, 88.63, 88.40 

USD/CHF 

Recovery attempt off 0.9270 zone, where the pair found support, cracks 0.9300 barrier and 0.9317, Fib 38.2% of 0.9387/0.9274 decline, signaling possible further extension higher, as hourly studies turned positive. With 4h structure gaining momentum,. Scope is seen for attempt towards 0.9350 breakpoint, previous highs and Fib 61.8%, to confirm base at 0.9280/70 zone and re-focus 0.9387 and 0.9400. 

Res: 0.9319, 0.9330, 0.9350, 0.9387 
Sup: 0.9300, 0.9283, 0.9273, 0.9248 

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie jumps one per cent as economic data impresses

    Market Movers
    techMARK 2,246.01 +0.71%
    FTSE 100 6,264.91 +1.09%
    FTSE 250 13,066.44 +1.02%

Better-than-expected economic data lifted the FTSE 100 over one per cent higher on Thursday afternoon, as markets shrugged off disappointing results from the world’s largest technology company,Apple.

American jobless claims and a US manufacturing survey from Markit came in better than forecasts today, sending London’s benchmark index surge in afternoon trade. Meanwhile, the Conference Board’s composite index of leading indicators increased by 0.5% in December, better than the +0.4% expected.

“All three releases have fuelled hopes for a strong recovery in the US allied with growing optimism that US lawmakers do have the will to agree on spending cuts and raise the debt ceiling without playing the same game of brinkmanship they participated in before the end of 2012,” said market strategist Ishaq Siddiqi from ETX Capital.

The S&P 500 in New York topped 1,500 following the news, the first time it has reached that level since 2007. The Dow also rose strongly, though the tech-heavy Nasdaq was being weighed down by a 10% drop from iPhone maker Apple after both revenues and profits missed forecasts.

Better-than-expected economic figures from Europe and China also lifted the mood today: the Chinese HSBC flash manufacturing purchasing managers' index (PMI) rose from 51.5 to a two-year high of 51.9 in January (consensus: 51.7); meanwhile, the Eurozone composite PMI increased from 47.2 to 48.2 in December (consensus: 47.5).

ETX Capital’s Siddiqi highlighted this afternoon that the FTSE 100 was outperforming other European indices today. He said: “Traders are citing rumours around tomorrow's Q4 GDP figures but it must be noted that the FTSE100 did underperform its European peers in 2012 so technically, there is plenty of room for upside. We are likely to see the index catch up with European peers through this year, especially if we continue to see more encouraging signs from China, the world's biggest consumer of commodities.”

Consensus forecasts are for a 0.1% quarter-on-quarter contraction in the UK economy in the fourth quarter of 2012, compared with the 0.9% growth seen in the third.

Europe Market Report 

European Markets Climbed On Economic Data 

The European markets finished Thursday's session in positive territory. Positive Chinese manufacturing data helped to overshadow some of the weakness caused by the disappointing earnings report from Apple in the United States. The Euro area private sector activity result also lifted hopes for a modest recovery in the region.

China's manufacturing sector activity rose to its highest level in two years in January as factory production picked up momentum, preliminary results of a survey by Markit Economics showed Thursday. The headline HSBC/Markit purchasing managers' index rose to 51.9 in January from 51.5 in December.

The marked improvement in Eurozone consumer confidence, as latest data showed, adds to hopes that the region's economy could at least stabilize in the first quarter, following an almost certain third successive quarter of contraction in the fourth quarter, IHS Global Insight Chief European and UK Economist Howard Archer said Thursday.

IHS Global Insight noted that the appreciable improvement in sentiment shows that Eurozone consumers are starting to become more upbeat about the economic outlook, although they still clearly have serious concerns over jobs.

The upturn adds to the evidence that the economic environment in the single-currency bloc has improved, and growth prospects are brightening following recent policy initiatives that have resulted in a substantial easing in sovereign debt tensions, the firm noted.

Bank of Canada Governor Mark Carney, next chief of the Bank of England said the governor should not overshadow the decisions of the central bank. At a press conference, Carney said he aims to ensure that the policy decisions do not rely too much on any particular individual.

"Part of my responsibility when I am there is that as the Bank of England gets additional responsibilities on the micro and macro prudential side, to ensure that the committee structure, the new governance structure, the other aspects, work to their full effect," he said.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.49 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.17 percent.

The DAX of Germany climbed by 0.53 percent and the CAC 40 of France advanced by 0.70 percent. TheFTSE 100 of the U.K. rose by 1.09 percent and the SMI of Switzerland gained 0.89 percent.

In Frankfurt, Commerzbank rose by 1.41 percent. The lender said it plans to slash 4000 to 6000 jobs at the Group level until 2016, with the exact amount of the reduction to be known after talks with the employee representatives.

US Market Report

Strength On Wall Street Lifts S&P 500 Above 1,500

Stocks are extending a recent upward move during trading on Thursday, with the S&P 500 climbing above 1,500 for the first time in over five years. However, a sharp drop by shares of Apple (AAPL) has helped to keep the tech-heavy Nasdaq in the red.

The major averages currently continue to turn in a mixed performance, with the Nasdaq posting a modest loss. While the Nasdaq is down 2.69 points or 0.1 percent at 3,150.98, the Dow is up 85.43 points or 0.6 percent at 13,864.76 and the S&P 500 is up 5.68 points or 0.4 percent at 1,500.49.

The modest loss being posted by the Nasdaq is due in large part to the steep loss being posted by Apple, with the iPad and iPhone maker down by 10.4 percent after reporting disappointing quarterly results.

After the close of trading on Wednesday, Apple reported better than expected first quarter earnings but on weaker than expected sales. The company also reported iPhone sales that missed expectations and provided disappointing second quarter revenue guidance.

Meanwhile, most stocks have moved to the upside on the heels of the release of a report from the Labor Department showing that initial jobless claims unexpectedly fell to a new five-year low in the week ended January 19th.

The report showed that initial jobless claims dipped to 330,000, a decrease of 5,000 from the previous week's unrevised figure of 335,000. The drop surprised economists, who had expected jobless claims to climb to 355,000.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 318,000 in the week ended January 19, 2008.

While the Labor Department said seasonal distortions are likely still in effect, Jennifer Lee, senior economist at BMO Capital, said the news on the job front is encouraging "even when you remove all of the noise."

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Thursday. While Japan's Nikkei 225 Index surged up by 1.3 percent, China's Shanghai Composite Index fell by 0.8 percent.

In the bond market, treasuries have slid firmly into the red on the heels of the upbeat jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.8 basis points at 1.861 percent.

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary: European Markets Finished Mixed As Investors Await U.S. Vote

Daily FX Commentary: (Morning Report)

EUR/USD 

The single currency remains in a sideways mode after yesterday’s bumpy ride, with price hovering around 1.3300. Hourly structure, however, is still aligned towards the downside, as the price holds below MA’s and indicators are in the negative zone. While range floor t 1.3280 that proved to be solid support, stays intact, range-trading will remain in play, while break lower would signal a fresh direction and expose 1.3250 and 1.3200. On the upside, regain of yesterday’s spike high at 1.3370, would improve the near-term structure, but only clear break above 1.3400 to signal resumption of an uptrend from 1.2660, 2012 low. 

Res: 1.3331, 1.3370, 1.3400, 1.3485 
Sup: 1.3280, 1.3255, 1.3200, 1.3151 

GBP/USD 

Near-term structure maintains negative tone, as the pair, unable to regain initial barrier at 1.5900, returns to near-term base at 1.5800. Bears remain favored, with near-term studies in the negative territory, being supportive for possible slide below 1.5800 handle that will confirm break below 4-month range and open way for fresh leg lower, with 1.5750 and 1.5700 seen as next targets. Any bounce would be of corrective nature and facing strong resistance at 1.5900, 200 day MA, ahead of 1.6000, also 50% of 1.6380/1.5800, break of which is required to provide relief. 

Res: 1.5840, 1.5900, 1.5947, 1.6000 
Sup: 1.5805, 1.5753, 1.5700, 1.5675 

USD/JPY 

Yen continues to strengthen against the dollar, on a reversal from 90.23 peak, with initial targets at 88.00 zone being tested so far, just ahead of key near-term support at 87.78, 16 Jan low. As 87.78/90.23 rally has been nearly fully retraced, break lower remains favored for now, with notion being supported by negative near-term studies. However, corrective action may precede fresh bears, as hourly indicators reached oversold zone. Bounces are going to face good resistance at 88.90/89.00 area, where previous highs and Fib 38.2% lie, reinforced by descending 55 day EMA. Only break above 89.50 would delay immediate bears. 

Res: 88.36, 88.56, 88.78, 89.00 
Sup: 88.05, 87.78, 87.35, 87.00


====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

Stocks lifted by upbeat US earnings

    Market Movers
    techMARK 2,230.24 +0.32%
    FTSE 100 6,197.64 +0.30%
    FTSE 250 12,934.40 -0.18%

London’s FTSE 100 finished with moderate gains on Wednesday afternoon ahead of a key vote over the potential extension of the debt ceiling Stateside, as some decent results from US bellwethers Google, McDonald’s and IBM lifted sentiment across stock markets worldwide.

The US House of Representatives is to vote this evening on whether to extend the government's debt ceiling until May 19th. A White House spokesman said that President Barack Obama "won't stand in the way" of this short-term fix.

For the time being, traders will likely focus on tech giant Apple’s results after the closing bell this evening. Earnings are widely expected to fall year-on-year due to a drop in the gross margin, however the market’s attention will undoubtedly be on the company’s outlook for 2013 amid concerns over disappointing smartphone sales as of late.

In other news, the International Monetary Fund (IMF) has slashed its growth forecasts for the global economy, saying that the upturn is expected to be ‘more gradual’ than previously thought. The IMF expects world output in 2013 and 2014 to expand by 3.5% and 4.1%, respectively, down 0.1 percentage point from earlier forecasts.

Markets shrug off Cameron speech

UK Prime Minister David Cameron's much-anticipated 'in-or-out-case' speech on Britain's membership in the European Union didn't really move markets this morning.

He committed his party to holding a referendum on whether the UK should remain in the EU in the first half of the next parliament (by the end of 2017 at the latest). "It is time for the British people to have their say; it is time to settle this question over Britain and Europe," Cameron said.

Financial trader Shavaz Dhalla from Spreadex said this morning that Cameron's speech "proved futile". He said: "European markets took the speech in their stride and digested enough information to gauge that the speech was probably designed to build momentum for Cameron’s next campaign rather than mount a serious economic backing for whether remaining in the EU is worthwhile."

BoE in wait-and-see mode

Minutes from the latest Bank of England policy meeting showed that members voted eight-to-one in favour of leaving the asset purchase programme unchanged at £375bn. The Monetary Policy Committee (MPC) voted unanimously to keep the Bank Rate at 0.5%.

Analyst Chris Crowe from Barclays Research said that the MPC is "still content to wait and see" with the committee "likely to resist expanding QE as long as the economy shows signs of stabilisation and improvement."

Meanwhile, the UK jobless rate fell from 7.8% to 7.7% in the three months to November, better than the consensus estimate for no change. The UK claimant count fell by 12,100 in December to 1.56m, the lowest since June 2011.

Europe Market Report 

European Markets Finished Mixed As Investors Await U.S. Vote

The European markets ended Wednesday's session with mixed results. The markets received a boost from positive earnings results from European giants such as Unilever and Novartis, as well as results from Google and IBM in the United States. However, many investors were hesitant to take a position ahead of the vote to pass a short-term debt ceiling increase in the U.S. House of Representatives. President Barack Obama has stated that he would sign the bill if it clears Congress. Investors will also be watching for the earnings report from Apple later today.

European Central Bank President Mario Draghi observed Tuesday that the 'darkest clouds' over the euro area have subsided while countries reinforced their commitment to reforms. In a speech in Frankfurt, he said resolute actions by euro area governments and European institutions have made the year 2012 quite different than predicted.

Bank of England Governor Mervyn King said it would be sensible to review the arrangements for setting monetary policy. The inflation target was introduced in the U.K. almost 21 years ago, and it has now 'come of age', he noted.

In a speech in Belfast, King said late Tuesday that the economy needs more fundamental reforms to underpin a "gentle recovery." There are certainly aspects of the inflation targeting regime to consider, King added.

British Prime Minister David Cameron on Wednesday said that he is in favor of a referendum on the UK's membership of the European Union, but insisted that he does not want the country to drift towards an EU exit.

In a much-awaited speech in London, he promised to hold an in/out referendum on EU membership by the end of 2017, if re-elected. Cameron said the next Conservative manifesto in 2015 will ask for a mandate from the British people for a Conservative Government to negotiate a new settlement with the European partners in the next Parliament.

With a majority of 8, the Bank of England's policymakers voted to maintain quantitative easing unchanged at the start of the year, as they saw limited stimulus to the economy from further easing. Policymakers led by Governor Mervyn King unanimously decided to retain the record low 0.50 percent interest rate. The meeting was held on January 9 and 10.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.25 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.46 percent.

The DAX of Germany rose by 0.19 percent, but the CAC 40 of France fell by 0.40 percent. The SMI of Switzerland increased by 1.35 percent and the FTSE 100 of the U.K. climbed by 0.34 percent.

French business confidence deteriorated unexpectedly in January as manufacturers assessed sharp contraction in past production and forecast a deterioration on own production outlook. The business sentiment index came in at 86 in January, survey data from the statistical office Insee showed Wednesday. It was forecast to rise to 90 from 89 in December.

Spain's recession likely deepened during the three months ended December, with gross domestic product falling for the fifth consecutive quarter, the quarterly bulletin from the Bank of Spain said Wednesday.

Gross domestic product (GDP) is estimated to have dropped at a faster rate of 0.6 percent sequentially in the fourth quarter than 0.3 percent in the third quarter, signaling that the economy has slipped deeper into recession. GDP contracted for the fifth successive quarter.

Government debt in the Eurozone stayed broadly unchanged in the third quarter, data released by statistical office Eurostat showed Wednesday.

Total public debt in the single-currency bloc came in at 90 percent of gross domestic product at the end of the third quarter, little changed from 89.9 percent recorded in the second quarter. The latest figure was, however, higher than 86.8 percent recorded in the third quarter of 2011.

U.K. employment total increased to a record high during three months ended November after people out of work decreased, data from the Office for National Statistics revealed Wednesday.

There were 2.49 million unemployed people in the country during the three-month period, down by 37,000 from June-August. At the same time, the number of people in work increased by 90,000 to 29.7 million for three months to November, the highest since records began in 1971.

The employment rate edged up to 71.4 percent from 71.3 percent during June to August. But it was lower than the pre-recession peak of 73 percent logged for March to May 2008.

US Market Report

Stocks Give Back Ground But Remain Mostly Positive

After showing a strong move to the upside in early trading on Wednesday, stocks have given back some ground over the course of the trading day but remain mostly positive. The markets are benefiting from a positive reaction to the latest batch of earnings news.

The major averages have pulled back off their highs for the session but are currently all in positive territory. The Dow is up 59.85 points or 0.4 percent at 13,772.06, the Nasdaq is up 10.08 points or 0.3 percent at 3,153.26 and the S&P 500 is up 0.36 points or less than a tenth of a percent at 1,492.92.

The modest strength on Wall Street extends a recent upward move by stocks, with the Dow and the S&P 500 reaching new five-year highs earlier in the session.

Traders have largely reacted positively to the latest earnings news, with upbeat quarterly results from some big-name companies inspiring confidence that the markets can sustain some further upside.

Tech giants IBM Corp. (IBM) and Google (GOOG) are both posting notable gains after reporting fourth quarter earnings that exceeded analyst estimates.

McDonald's (MCD) is posting a more modest gain after the fast food giant reported fourth quarter earnings that rose year-over-year and came in above analyst estimates. The company also reported stronger than expected revenue growth.

Fellow Dow component United Technologies (UTX) reported fourth quarter earnings that fell compared to the year-ago quarter but still came in slightly above expectations. The diversified conglomerate also reaffirmed its guidance for 2013.

Shares of iPad and iPhone maker Apple (AAPL) are up by 0.8 percent ahead of the release of its fiscal first quarter results after the close of trading.

Nonetheless, buying interest has waned from earlier in the session, as traders remain somewhat reluctant to continue buying stocks following the recent strength.

Traders are also keeping an eye on developments in Washington, where the House is preparing to vote on a three-month extension of the U.S. debt limit.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.1 percent, while China's Shanghai Composite Index rose by 0.3 percent.

In the bond market, treasuries are seeing modest strength, adding to the slim gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.1 basis points at 1.824 percent.

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary-Spanish 10 year bond yields drop

Daily FX Commentary: (Morning Report)

EUR/USD 

Near-term bulls returned fully in play, as the price accelerated on a break above 1.3100/38 barriers, to penetrate psychological 1.3200 resistance. With gains retraced near 76.4% of 1.3300/1.2996 descend, near-term focus shifts towards very strong 1.3300 barrier that capped several attempts in December. Studies on 4h chart are in ascending mode and see room for further extension higher, however, overextended hourly conditions could anticipate corrective action that has not been signaled yet. Daily close above 1.3200 handle would be seen as supportive element. 

Res: 1.3218, 1.3227, 1.3260, 1.3282 
Sup: 1.3200, 1.3160, 1.3150, 1.3138 

GBP/USD 

The pair bounces above 1.6100 barrier, also 55 day EMA that avoids immediate downside risk of penetrating important 1.6000 support, with rally to 1.6118 so far, nearly fully retracing 1.6126/1.5991, 08/09 Jan descend. Lift above 1.6126 and Fibonacci 38.2% at 1.6140 is required to confirm break above near-term 1.6126/1.6000 range and open way for stronger recovery, as currents movements could be described rather consolidative. Fresh bullish momentum on 4h chart is sen supportive, while hourly studies moved in the positive territory. Initial supports lie at 1.6080/70 zone, approx mid-point of today’s rally and should ideally contain any corrective dips. 

Res: 1.6118, 1.6126, 1.6140, 1.6185 
Sup: 1.6081, 1.6074, 1.6034, 1.6000 

USD/JPY 

The pair consolidates recent gains within 88.32/00 range, just ahead of key near-term barrier and recent high at 88.40. Today’s close above 88.00 would be supportive for fresh attempt and break above 88.40 to open 89.00 next. Near-term structure maintains positive tone, however, risk would be seen on a loss of 88.00 handle that may signal near-term double top and trigger stronger correction, as overextended daily studies require caution. 

Res: 88.32, 88.40, 89.00, 89.14 
Sup: 88.00, 87.85, 87.71, 87.40 

USD/CHF 

The pair lost traction on approach to 0.9280/0.9300 barriers, with subsequent reversal accelerating losses on a break below initial 0.9230 and more significant 0.92000 support. With fresh weakness retracing 61.8% of 0.9080/0.9300 rally at 0.9160, more risk is now seen towards the downside, as strong supports at 0.9100 and 0.9080 base are coming in near-term focus. As 4h chart indicators slide below the midlines, scope is seen for possible re-visit of 0.9100/0.9080, with oversold hourlies signaling corrective action that may precede fresh bears. However, no firm signal of reversal seen yet. Previous supports at 0.9200/0.9230 now revert to resistance and being reinforced by 55/20 day EMA’s respectively. 

Res: 0.9200, 0.9230, 0.9241, 0.9265 
Sup: 0.9160, 0.9130, 0.9100, 0.9080



====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets flat as central banks hold rates

Market Movers

• techMARK 2,192.46 -0.05%
• FTSE 100 6,101.51 +0.05%
• FTSE 250 12,730.78 +0.17%

The FTSE 100 swung between gains and losses for most of Thursday's session as investors digested a host of economic data, bond auctions in the Eurozone and policy decisions by the Bank of England (BoE) and European Central Bank (ECB).

Nevertheless, the Footsie managed to finish in positive territory, extending a near four-year high from the day before. The index finished at 6,099 on Wednesday and at 6,102 today, its highest closing level since May 22nd 2008.

Chinese trade rebounded strongly last month, boosting sentiment early on. The trade surplus totalled $31.6bn in December, well ahead of the $19.6bn surplus reported in November and the $20bn forecast. Exports jumped by 14.1% year-on-year, ahead of the 5% estimate, while imports also beat expectations rising by 6%, ahead of the 3.5% estimate.

Meanwhile, solid debt auctions in Spain and Italy also provided some support this morning, as Eurozone peripheral bond yields on the secondary market plunged. Specifically, Spanish benchmark 10-year yields dropped below 5% for the first time since March 2011.

At midday, the BoE announced that it has kept its official Bank Rate at 0.5% and its asset purchase programme at £375bn. Analyst Philip Shaw from Investec said that 'on-hold' decision was widely expected. "We characterise recent economic data as mixed rather than gloomy and share some of the MPC's optimism over the potential effects from the FLS. Accordingly we consider the chances that the committee sanctions more QE to be less than 50-50, especially as we expect inflation to exceed 3% later this year."

Shortly after, the ECB also decided to keep rates on hold at 0.75%. In the following press conference, ECB President Mario Draghi reiterated that medium-term inflation expectations remained well anchored and that he expected inflation to come in below or very close to the 2% target this year. While he said that risks to the economic outlook remain on the downside, the Eurozone recovery is expected to begin at the year.

Markets looked like they would finish higher today, but disappointing jobless claims figures in the USerased gains in afternoon trade. Claims for unemployment benefits increased to 371,000 last week, higher than the 365,000 consensus forecast.

Europe Market Report 

Europe midday: Periphery bond yields move lower

-Investors wating for ECB press conference
-Successful Spanish and Italian Treasury debt auctions
-Spanish 10 year bond yields drop 18bp to 4.95 per cent

FTSE-100: 0.09%
Dax-30: 0.21%
Cac-40: 0.23%
FTSE Mibtel: 0.68%
Ibex 35: -0.05%
Stoxx 600: -0.05%

The tone to trading on the main European equity benchmarks has improved somewhat but remains mixed ahead of European Central Bank President Mario Draghi's press conference, which is scheduled to start at 13:30.

Both the European Central Bank and the Bank of England opted to maintain their current monetary policy settings.

It will be interesting to see if the Basel Committee on Banking Supervision's decision to relax the requirements for bank's liquidity buffers –taken this past Sunday – influences the ECB's thinking.

Both the Spanish and Italian treasury auctions this morning have been successful.
For its part the Spanish Treasury sold €5.8bn in debt instruments, versus the €5bn that were expected. The bid-to-cover ratio for the 5 year debt on offer rose to 2.6, versus 1.57 last time, and to 2.9 for the tranche of 13 year debt being sold, versus 2.06 the last time around. "Influenced by this past Sunday's decision from the Basel Committee on Banking Supervision?" economists at Digital Look are asking.

Acting as a backdrop, speaking on Bloomberg TV PIMCO's Andrew Bosomworth forecast that the ECB will cut rates, but not at today's meeting.

Slight gains in single currency

The euro/dollar is now edging higher by 0.35% to the 1.31 dollar mark.

Front month Brent crude futures are rising by 0,869 dollars to the 112.73 dollar per barrel mark on the ICE.

US Market Report

US open: Stocks waver at resistance

- Acampora sees multi-year advance on Wall Street
- In-line initial weekly unemployment claims

Dow Jones Industrials: 0.27%
Nasdaq Comp.: 0.42%
S&P 500: 0.34%

The major US equity benchmarks are now registering modest advances.

Helping to hold stocks aloft are the better than expected export figures which were released overnight in China.

Nevertheless, levels of technical resistance have yet to fall, with the S&P 500 having reached an intra-day high of 1,469, versus resistance at 1,471 which some analysts are now watching.

Of interest, technical analyst and Wall Street legend Ralph Acampora believes investor sentiment toward US stocks is poised to change for the better and contribute to a multi-year advance, Bloomberg reports.

Weekly US initial unemployment claims rose by 4,000 to 371,000 (Consensus: 365,000). The previous week's reading was revised down by 5,000 to 367,000.

Front month West Texas crude futures are now rising by 1.19% to the 94.16 dollar level on the NYMEX.

10 year US Treasury yields are now rising by 3 basis points, to the 1.90%. 

==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - Fed minutes have injected a greater mood of uncertainty

Weekly Market analysis

Following the drama surrounding the US fiscal cliff talks, monetary and currency policies will remain a very important focus. The Federal Reserve will maintain a very loose monetary policy for now, butt he latest Fed minutes have injected a greater mood of uncertainty and the possibility of a tightening. TheBank of Japan will also be under intense pressure to boost policy further.  The ECB will also consider further action to underpin the economy which will ensure very loose monetary conditions and may serve to lessen the threat of a severe deterioration in risk appetite. Key events for the forthcoming week Date Time (GMT) Data release/event Friday January 4th 13.30 US employment report Thursday January 10th 12.00 Bank of England interest rate decision Thursday January 10th 12.45 ECB interest rate decision Dollar:  The US fiscal deal has eased immediate fears surrounding a disorderly policy tightening. Nevertheless, there will still be a significant policy tightening which will have some impact in curbing consumer spending growth.  The deal was also only a stop-gap measure and there will be further political confrontation surrounding spending cuts and the debt ceiling. There will be uncertainties surrounding the growth outlook and risk conditions. There is a very dovish Federal Reserve committee for 2013, but the latest minutes will spark some speculation that there will be some tightening later in 2013. Net longer-term yields should be dollar supportive for the US currency. After initial weakness following the US budget deal, the dollar found support near 1.33 against the Euroand rallied strongly against European currencies Following the deal to avert the immediate US fiscal crisis, there was a renewed consideration of the longer-term outlook. There were further concerns that the spending issue would have to be tackled again before the end of February and Congress will also have to tackle the debt-ceiling issue with the potential for further tense negotiations. There was some reassessment of risk considerations which also curbed dollar selling. As far as the US data releases were concerned, there was an increase in the ISM manufacturing index to 50.7 from 49.5 which provided some degree of relief. The ADP employment data was stronger than expected with a gain of 215,000 private-sector jobs for December from a revised 118,000 previously. Although there was a higher than expected release for jobless claims, there was greater optimism surrounding the US payroll report. The latest FOMC minutes stated that some members were concerned surrounding risks associated with further quantitative easing, especially as it would make it more difficult to secure an eventual exit strategy. In this context, several members wanted to scale-back bond purchases well before the end of 2013. There was still some degree of caution surrounding the labour market, but there was shift in expectations on potential tightening this year as markets had been primed for a very dovish tone.

Euro

Structural fears surrounding the Euro-zone have eased for now which will lessen the potential for aggressive selling pressure.  There will still be a high degree of unease surrounding the growth outlook and there will also be pressure for the ECB to relax monetary policy further.  The bank will still be uneasy over the prospect of negative deposit rates and there will also be opposition from the Bundesbank.  Any friction within the ECB will tend to undermine confidence in the Euro.  There is also less scope for capital repatriation which will tend to lessen scope for Euro buying and a Spanish aid request would be likely to provide only initial currency relief. The Euro was unable to sustain an initial advance following the New Year break and retreated sharply towards the 1.30 level against the dollar.   Italy’s lower house approved the 2013 budget in parliament and, as expected Prime Minister Monti submitted his resignation.  There were some suggestions that he could stand for election in forthcoming elections, but uncertainty remained high. The final Euro-zone PMI data was slightly weaker than expected with a dip to 46.1 from 46.3 as there was a dip in the German index with an improvement in the Italian index offset by a weaker Italian outcome. The data maintained some degree of unease surrounding the Euro-zone outlook which dampened Euro demand. There was some speculation that capital repatriation associated with the year-end Euro demand to bolster balance sheets had eased. An easing of flows could be significant in triggering a wider loss of Euro support. There was further speculation that the ECB could consider a cut in interest rates at the January meeting, but a higher than expected German inflation reading increased speculation that there would be Bundesbank opposition to any rate cut and there would also be unease within the Council over any move to set a negative deposit rate. Although a surprise decline in Spanish unemployment, provided some relief, there were concerns that the fall reflected longer-term unemployed leaving the labour market rather than any real improvement in conditions.  The German labour-market data was close to expectations with a 3,000 unemployment increase for December. The latest money-supply data recorded an eighth successive decline in private lending which maintained unease over the outlook, but there was a small increase in banking-sector deposits in Italy and Spain which provided some relief. Spain’s admission that it was using social security funds to buy government bonds also unsettled confidence and sparked expectations of a bailout soon. Yen:    There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with the next policy meeting due in the third week of January.  The government is also planning a further round of aggressive fiscal stimulus in an attempt to ease deflationary pressure. These factors combined will tend to have a negative impact on the yen, especially with a lack of confidence in the Japanese fundamentals. The Japanese currency will still gain some degree of support when risk appetite deteriorates and there will also be pressure for a limited correction after recent sharp losses. The yen remained extremely weak as it dipped to the lowest levels in more than two years against the dollar. Incoming Prime Minster Abe continued aggressive calls for deflation to be tackled and warned that he would look to change the central bank Act which ensures independence if the Bank of Japan fails to meet inflation targets. Expectations that there would be aggressive action to ease deflation risks through aggressive monetary and fiscal policies continued to have a negative impact on the yen.  Weak underlying yen sentiment was offset by pressures for a technical correction following sharp losses and the dollar consolidated above the 87 level with Japanese markets still closed for a holiday. The dollar found strong support on dips and pushed back above 87 with initial support from the stronger than expected US ADP report. There was further buying support following the Fed minutes with a shift in expectations. Japanese markets re-opened following the new-year break which triggered a fresh round of yen selling, particularly with a widening in yield spreads to the highest level since April. The dollar pushed to a fresh 29-month high above 87.75 against the Japanese currency.

Sterling There will be mixed expectations surrounding the UK outlook with a divergence in analyst expectations and mixed data. Overall, there is slightly reduced fear surrounding the threat of another slide into recession, especially with some evidence that consumer lending is improving. In relative terms, the UK currency will also gain some support on relative grounds with expectations of loose monetary policies in the US and Euro-zone.  The UK currency will tend to lose ground when risk appetite deteriorates and will struggle to make further significant headway against the US currency. Sterling initially spiked higher against the US currency following the New Year break before hitting strong selling pressure with a retreat to lows below 1.61 . The UK data was significantly stronger than expected with an increase in the PMI manufacturing datato 51.4 for December from a revised 49.2 the previous month which was the highest figure for 16 months. The data also provided some degree of optimism surrounding the UK economy which provided underlying Sterling backing. There was initial Sterling support from an improvement in international risk appetite as the UK equity market tested the highs from mid 2011, but there was a slightly more cautious tone later in the week which pushed Sterling lower. The latest PMI construction report was weaker than expected with a decline to a six-month low of 48.7 from 49.3 the previous month. The data dampened optimism triggered by the stronger than expected manufacturing release and the latest services-sector data will be watched very closely on Friday and will have an important impact on underlying sentiment. Swiss franc:  The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to protect competitiveness and avert any serious deterioration in industrial conditions. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again as investors look for a safe-haven, especially if the Japanese yen is subjected to further selling. The Euro held relatively steady against the franc, but was unable to hold above 1.21. After finding support around seven-month lows, the US currency pushed to a fresh 3-week high above 0.9280 as the dollar secured wider support. The latest PMI report recorded an increase to 49.5 for December from 48.5 previously. In contrast, the latest KOF index retreated to 1.28 for the month from 1.50 previously which will maintain unease surrounding business confidence and pressure for franc gains to be resisted. Australian dollar The Australian dollar continued to probe resistance above 1.05 against the dollar, but it was unable to sustain the gains and retreated back to below this resistance area late in the week. The currency drew initial support from gains in risk appetite following the US fiscal deal before the mood turned more cautious again as enthusiasm faded. There was a slightly more optimistic tone surrounding the Chinese outlook which provided some support for the Australian currency. The domestic PMI indices were still generally lacklustre amid fears over a further slowdown with a significant deterioration in the services-sector index. Despite potential reserve diversification, the Australian dollar will find it difficult to sustain gains, especially as Chinese economic sentiment is liable to deteriorate again. Canadian dollar:  After finding support on dips towards parity, the Canadian dollar was able to recover ground and move back to the 0.9840 area on a general improvement in risk appetite following the US fiscal deal. The US currency was resilient at lower levels and moved higher as markets turned significantly more cautious while the Fed minutes provided net US support. Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to sustain any significant gains.  ==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. 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