US indices started off with some excitement in the morning as both the S&P (again) and the Dow flirted with all-time highs. Following the release of slightly soft PMI numbers for the US, both indices slipped back a bit and traders have spent most of the day reflecting on recent news and positioning for tomorrow’s US and Canadian employment reports. USD has been strong today on speculation that nonfarm payrolls may come in strong as ADP payrolls did which would provide further support to continued tapering and shortly thereafter, interest rate increases (current expectations are for rate hikes to start in mid-2015, six months after tapering ends late 2014). USD has also benefitted from weakness in EUR which was sparked by dovish comments from ECB President Draghi that an interest rate cut and negative deposit rates were discussed that that how a European QE program could be structured may be mulled over. Considering how much the ECB has contracted its balance sheet through its stealth tapering program over the last year, it certainly has the firepower should it decide to step up stimulus. Because of this, continental currencies have underperformed today, particularly EUR, CHF, SEK and NOK. AUD, NZD have fallen less than European currencies and appear to be stabilizing against the greenback. JPY has been mixed falling against USD but gaining against EUR. CAD has been steady near $1.1000 but could be more active tomorrow following the Canada jobs report. Gold has fallen slightly mainly in reaction to the USD rally while energy and grains are trading moderately higher. It appears that political risk trading has become more subdued as tensions have not worsened and markets have adjusted risk premiums to reflect current trends. Tonight there are no major news items scheduled for Asia Pacific countries so we may see markets continue to react to yesterday’s small Chinese stimulus package and this week’s data as traders around the world prepare for the main event of the week, US nonfarm payrolls. In Europe, retail sales and factory orders numbers may attract some attention as well. Economic News Significant announcements released overnight include: Eurozone interest rate 0.25% no change as expected US Challenger layoffs 34K vs previous 41K US jobless claims 326K vs street 319K US trade balance ($42.3B) vs street ($38.5B) Canada trade balance $0.29B vs street $0.20B US foreclosures 43K vs year ago 51K US natural gas (74 BCF) as expected Eurozone retail sales 0.8% vs street 0.7% Service PMI reports include: US Markit service PMI 55.3 vs street 55.7 US ISM non-manu PMI 53.1 vs street 53.5 and previous 51.6 Brazil service PMI 51.0 vs previous 50.8 Spain 54.0 vs street 53.3 South Africa 50.2 vs previous 51.5 Italy 49.5 vs street 52.3 France 51.5 vs street 51.4 Germany 53.0 vs street 54.0 Eurozone 52.2 vs street 52.4 UK 57.6 vs street 58.2 Upcoming significant announcements include: 7:00 am BST Germany factory orders street 6.8% 8:30 am BST Germany construction PMI previous 53.6 9:10 am BST Germany retail PMI previous 52.1 9:10 am BST Eurozone retail PMI previous 48.5 10:00 am BST Greece retail sales previous (6.7%) 8:30 am EDT US nonfarm payrolls street 200K vs previous 175K 8:30 am EDT US private payrolls street 200K vs previous 162K 8:30 am EDT US unemployment rate street 6.6% 8:30 am EDT Canada jobs change street 22.5K vs previous (7K) 8:30 am EDT Canada full-time jobs previous 19K 8:30 am EDT Canada part-time jobs previous (26K) 8:30 am EDT Canada unemployment rate street 7.0% 10:00 am EDT Canada Ivey PMI street 59.0 vs previous 57.2

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