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Big Breakouts for Dollars and Yen underway

CMC Markets

AUD and NZD have both been breaking out of bases overnight while JPY has also been on the rebound to put Asia Pacific currencies to the top of the FX league to start the week. Following the initial shock of Friday’s disappointing job reports out of the US and Canada, markets have gone back to trading on anticipation of a consistent Fed QE tapering program. There is a growing feeling that the December nonfarm payrolls may have been distorted by weather, the holidays and the big upward revision to November’s job growth, particularly since ADP payrolls had been strong. In addition, speeches from FOMC members since the payrolls came out have given the impression that while they continue to monitor data, one bad monthly result isn’t going to spook them or cause them to change their plans. With traders back to anticipating ongoing tapering, US indices have been backsliding with the Dow dropping over 100 points again at one point. This action suggests shares have come under distribution on speculation the Fed may take away the liquidity punch bowl that had fuelled the gains of the last year. Shares could be volatile over the next three weeks in particular as earnings season gets underway in earnest. USD started the day strong on tapering speculation but has given back some of its gains in the afternoon, enabling gold, silver and JPY to rebound. AUD and NZD have been rallying on speculation that an improving global economy could boost resource demand and commodity prices. Keep an eye on today’s NZ house prices as the result may give a better indication of how much pressure the RBNZ is under to start raising interest rates soon to keep house prices under control. Tomorrow brings US retail sales which may give a better indication of the strength of US consumer spending trends. It also brings a round of inflation reports out of Europe that continues through other regions as the week progresses. In the inflation reports, traders may be looking in particular for any signs of possible deflation which could kick the central banks trend toward policy normalization this year off course. Corporate News Economic News Significant announcements released overnight include: Italy industrial production 1.4% vs street 0.0% Greece consumer prices (1.7%) vs street (2.1%) India consumer prices 9.8% vs street 10.0% Upcoming significant announcements include: 10:00 am AEDT NZ house prices previous 9.2% 10:50 am AEST Japan trade balance street (¥1,236B) TBA China new yuan loans street 570B vs previous 624B 7:45 am GMT France consumer prices street 0.8% 9:00 am GMT Italy consumer prices street 0.6% 9:30 am GMT UK consumer prices street 2.1% 9:30 am GMT UK producer input prices street (1.5%) 9:30 am GMT UK producer output prices street 1.0% 9:30 am GMT UK retail prices street 2.7% 10:00 am GMT Eurozone industrial prodn street 1.8% 8:30 am EST US retail sales street 0.1% vs previous 0.7% 8:30 am EST US retail ex auto street 0.4%

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