After a number of large swings over the last two weeks, Monday finds markets searching for direction as they continue to digest Friday’s mixed employment reports from the US and Canada and ahead of key guidance on monetary policy. Tomorrow’s first testimony to Congress from new Fed Chair Yellen and Wednesday’s UK inflation report are widely expected to give central bank leaders an opportunity to outline direction and adjust guidance for their monetary policies in an improving economic environment. In the US consistent tapering appears to be in the cards for this year but Dr. Yellen may try to downplay when interest rate increases may start. Similarly, BoE Governor Carney is expected to back away from the 7.0% unemployment rate threshold for action since it has nearly been reached years sooner than had been imagined last summer when the guidance was first outlined. While awaiting these speeches stock markets have been grasping for direction with US indices close to flat, European indices slightly higher except for the IBEX, and a mixed performance out of Asia where Japan and Australia rallied to start the week while the Hang Seng dropped. Currency markets have also been relatively to stable to start the week but there have been three significant moves. NOK has rallied to the top of the league table as higher than expected inflation has ignited speculation that interest rates in that country may need to rise. On the other hand, lower than expected house price increases in NZ has cooled speculation that the RBNZ may need to raise rates at its next meeting, dragging NZD down and AUD along for the ride. CAD has retreated a bit today after Canadian housing starts came in a bit soft. A rally in gold up toward $1,275 suggests some defensive rotation. Natural gas is under pressure again today despite another cold start to the week as traders start to look past the peak and toward the end of home heating season. Economic News Economic reports released overnight and this morning include: Canada housing starts 180K vs street 185K France industrial production 0.5% vs street 1.0% France manufacturing prodn 0.5% vs street 0.7% Italy industrial production (0.7%) vs street 0.9% Greece industrial production 0.5% vs street (6.1%) Norway consumer prices 2.3% vs street 2.0% NZ house prices 9.6% vs previous 10.0% Economic reports due later today include: There are no major reports scheduled for North America later today.

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