London Session
Published: February 3, 2009 7:48 AM

The price action was relatively calm in London trading as markets continue to look forward to the ECB rate meeting and US nonfarm payrolls into the latter part of the week. European equities were flat pretty much across the board and the FX space was rather calm. EUR/USD managed to eke out a modest 10 pip rally and was sitting near 1.2870/80 just ahead of the NY session. This was despite another poor batch of economic data across the pond.

German retail sales declined -0.2% in December while the market was looking for an improvement to +0.5% from -0.1% the prior month. Meanwhile, eurozone producer prices fell -1.3% and this was also steeper than expected and took the annual run-rate to just 1.8% from 3.3% previously. Thus the ECB will remain hard-pressed to argue that inflation remains a problem near-term.

The yen crosses were likewise little changed as risk trades remained without direction. USD/JPY slipped a modest -18 pips towards 89.50/60 while EUR/JPY was just -15 points lower into the 115.20/30 zone. USD/CAD managed a 30 pip rally to 1.2450/60 as oil prices came off a touch towards $40.20/bbl. The $40 level for crude looks pivotal here and we briefly tried below it yesterday. We would expect a good break to the downside would see USD/CAD approach 1.2500/10 with relative ease.

Upcoming Economic Data Releases (NY Session) prev est

2/3 15:00 GMT US Pending Home Sales MoM DEC -4.00% 0.00%

2/3 22:00 GMT US ABC Consumer Confidence 1-Feb -54 - -

2/3 US Total Vehicle Sales JAN 10.3M 10.2M

2/3 US Domestic Vehicle Sales JAN 7.8M 7.7M

New York Session
Published: February 3, 2009 5:11 PM

Risk taking was back in vogue in NY trading as earnings from the healthcare space and better than expected pending home sales put a bid under stocks. The S&P 500 rallied more than +1.5% as US pending home sales jumped 6.3% in November after a -3.7% pullback the prior month. Pending sales lead existing sales by about two months and this suggests at least some improvement in January sales.

With the number of vacant homes in the US reaching a record 19 million for 2008, however, any modest move higher in sales is likely to provide little relief to the inventory overhang. US Treasuries sold off in good size as well and the 2-year yield jumped 7bps to 0.96% while the 10-year rate was more than 16bps higher at 2.88%. Gold remained pretty resilient, closing down just -$5 near the $900/oz mark and somewhat defying the overall flight from safety.

Risk trades in FX land headed higher on the follow. EUR/USD added more than 180 pips into the 1.3030/40 zone on a good rally from 1.2950 in the latter part of the session. EUR/JPY was bid about 140 points towards 116.50/60 and this left USD/JPY a touch weaker near the 89.40/50 area. GBP/USD rocketed more than 200 pips towards 1.4450 as risk appetites drove cable higher. USD/CAD meanwhile slipped more than -180 pips as crude oil prices rose a little less than $1 but held on to $40/bbl support nicely.

Upcoming Economic Data Releases (Asia Session) prev est

2/3 22:30 GMT AU AiG Performance of Service Index JAN 39.3 - -

2/4 0:01 GMT UK Nationwide Consumer Confidence JAN 47 45

2/4 0:30 GMT AU Retail Sales Trend (MoM) DEC 0.10% 0.30%

2/4 0:30 GMT AU Retail Sales s.a. (MoM) DEC 0.40% 1.00%

2/4 0:30 GMT AU Building Approvals (MoM) DEC -12.80% 2.00%

2/4 0:30 GMT AU Building Approvals (YoY) DEC -34.70% -29.70%

2/4 2:00 GMT NZ ANZ Commodity Price JAN -7.40% - -

Upcoming Economic Data Releases (London Session):

2/4/2009	8:50	FR	PMI Services	JAN F	42.9	42.9
2/4/2009	8:55	GE	PMI Services	JAN F	45.4	45.4
2/4/2009	9:00	EC	PMI Services	JAN F	42.5	42.5
2/4/2009	9:00	EC	PMI Composite	JAN F	38.5	38.5
2/4/2009	9:30	UK	PMI Services	JAN	40.2	40.3
2/4/2009	10:00	EC	Euro-Zone Retail Sales (MoM)	DEC	0.60%	-0.20%
2/4/2009	10:00	EC	Euro-Zone Retail Sales (YoY)	DEC	-1.50%	-1.40%
2/4/2009	10:30	UK	BRC January Shop Price Index (Table)	4-Feb

Today's Market Update

Asia Session
Published: February 4, 2009 1:20 AM

The US Dollar made some modest gains in Asia against the Euro, Yen, as well as the commodity currencies down under in a quiet trading session ahead of some important data later in the week. The Greenback came off NY lows near 1.3050 and the EUR/USD pair hit 1.2954 as a low before a slight rebound heading into London. The ECB will meet on Thursday for a rate decision meeting in which no rate change is expected, but all eyes will be focused on the comments by ECB President Trichet following the ''non-decision''. Trichet has hinted that the rate cutting cycle may resume in March. Many feel that this pause in cutting could prove to be detrimental the Euro Zone as it lags behind the rest of the global economy as far as lowering rates aggressively.

USD/JPY grinded higher in a tedious fashion, but nonetheless gained ground from near 89.31 to highs just over 89.60. The Dollar was boosted by surprisingly better than expected housing data, and although many are looking with a weary eye toward US employment data at the end of the week. Down under, AUD/USD hit a low of 64.57 before bouncing back to .6500, and NZD/USD bottomed out at 0.5079 before getting back to just over 0.5125.

Be aware of Euro Zone Retail Sales later at 10:00GMT.