The dollar experienced massive losses as risk appetite surged lifting the financial markets. The EurUsd rallied 150bps to the mid range of 1.29, while the UsdJpy gained nearly 70pips finding resistance at 92. Equity markets jumped in the US and Europe, with the Dow up 2.7% or 270pts and the DAX added 134pts or 3%. Bond yields were mixed surprisingly, the 2yr in particular didn’t catch as much downside as one would expect, with the Fed buying it will be hard to pop the fixed income bubble. Commodities were lower in both the energy and precious metals sectors with oil at $40bbl and gold at $911oz.

UK Industrial production in December came out ‐1.7% versus the expectation ‐1.2%. The rate of decline was the worst since 1981. This bad number stands as a mild setback to the pound bulls. The cable retraced part of the early rally in which the price had touched 1.4770 high. But the cable still remains above the 1.4609 handle and we still keep our bullish outlook on the Sterling in the short term. The euro rally, but was capped by the release of worse that forecasts German GDP. In US, the Nonfarm payrolls decreased by 598k in January, a larger than expected decline and pushed the unemployment rate to 7.6%. So far, the economy has lost 3.21m jobs since 2008 and almost 2.5m jobs over the last 5 months. Furthermore, Deutsche Bank forecasted the unemployment rate will reach 9% in Q1 2010 from its conference call today. However, the dollar’s going up against Yen suggested currency traders believe such a bad employment number will push the government to pass the $937b stimulus plan quickly. They are also hoping a positive Senate vote today and a bank rescue package next Monday. Meanwhile, Canada released its weakest payroll ever at ‐126k, which is more than 3 times expectations. We keep our bearish perspective on the Canadian Dollar due to the weakening Canadian economy under the slower exports and lower commodity prices.

ACM Forex
Advanced Currency Markets