EUR firmer as IMF looks to boost lending power

A mixed session for risk and the associated currencies overnight, with the bulls eventually winning. EUR slid initially as Fitch announced a two notch Italian downgrade but the dip was brief and news that the IMF was hoping to boost its lending power by $500 bln saw a faster move through 1.28 versus the dollar. The rally halted briefly after USA and Canada announced that they had no more plans for more IMF funding. Nevertheless, momentum and better US data helped the risk-on trade and the NY session closed at the highs. GBP was able to shrug off an unchanged UK unemployment rate, though still at 17-year highs, as the claims change only posted a 1.2k increase.

On the US front, producer prices were lower in December (-0.1% m/m from +0.3% last) but core levels were higher (up 0.3% m/m from +0.1%). Industrial production was a mild disappointment at +0.4% versus +0.5% consensus with capacity utilization bang in line with forecasts at 78.1%. The good news came from the NAHB housing market index which rose to 25 from 21 (22 expected) and was the best survey since June 2007 giving further evidence that the US housing market may be bottoming out. Wall St pushed higher on the back of the data with the S&P scaling, and closing above, the 1,300 handle for the first time since July 28 last year.

Today’s Asian session is dominated by the Australian employment report for December with expectations of 10k jobs added during the month and an unchanged unemployment rate of 5.3%. Other data releases include confidence indicators from both New Zealand and the UK and the Conference Board’s China leading index for November. It is a relatively barren data slate in Europe with Euro-zone current account data the only item scheduled but things pick up in the US session with CPI, housing starts/building permits, weekly jobless claims and Bloomberg consumer comfort and economic expectations indices. January’s Philly Fed index completes the picture.