Market News

• does not expect it be rapid unless the Fed fails to exit from monetary accommodation;

• still expects a "moderate" recovery in the year ahead with growth on the order of 3.5%.

AUD/USD rose to new four-week highs around $1.0150 Tuesday, with improved risk appetite offsetting the fact that the Reserve Bank of Australia left the cash rate unchanged at 4.75%. Solid manufacturing purchasing managers index readings, in the U.S., the UK and the eurozone, sparked new willingness to put on risk Tuesday.

The stock market has eased back a couple of points over the course of the past couple of hours, but it still remains sharply higher for the session. Strength remains broad based with close to 90% of the names in the S&P 500 in higher ground and McDonald's (MCD 73.50, -0.17) the only blue chip in the Dow to trade with a loss.
Toyota Motor (TM 83.15, +0.97) recently released its January figures for U.S. sales, which increased 17% from the prior year.
Daimler AG (DAI 73.96, +0.84) reported a 14% increase in U.S. sales during January.
Chrysler Group posted a 23% year-over-year increase in U.S. sales for January.
General Motors (GM 36.66, +0.17) announced a 23% annual increase in January sales.
Ford Motor (F 16.07, +0.12) posted a 13% increase in total January sales.
Nissan Motor (NSANY 20.52, +0.17) said its North American sales increased 15% in January from a year earlier.

DB warns to look for weather effects and annual revisions in Jan jobs report. Their estimate is +125k Jan payrolls, and weakness could stem from inclement weather during the survey pd.

EUR/USD continues to track higher with recent dealings to $1.3835. Euro erased earlier reported supply to $1.3630 and some nearby stops mixed in but should find further supply at $1.3850 and at $1.3880.

The dollar declined against all its most-traded counterparts as a report showed U.S. manufacturing rose at the fastest pace in almost seven years, encouraging demand for higher-yielding assets.
The Institute for Supply Management’s U.S. manufacturing index unexpectedly increased to 60.8 in January from 58.5 in the previous month, the Tempe, Arizona, group reported. That indicates the fastest growth since May 2004.

The euro rose above $1.38 as the purchasing managers’ index for Europe increased.
A gauge of manufacturing in the euro region rose to 57.3 in January from 57.1 in December, London-based Markit Economics said today. That’s the highest since April and above the initially reported 56.9.
Egyptian protesters began gathering in Cairo for a march as newly appointed Vice President Omar Suleiman said late yesterday that President Hosni Mubarak instructed him to start a dialogue with the demonstrators. The military promised not to fire on marchers and said that it recognized “the legitimacy” of the people’s demands.
“We’re not looking at any major fallout globally from Egypt at the moment,” said Brian Dolan, chief strategist at FOREX.com.
The pound advanced as much as 0.9%.
The Bank of England will raise its 0.5% main rate three times this year to prevent a surge in consumer prices from becoming entrenched, according to the National Institute for Economic and Social Research. The group forecasts that the rate will rise to 1.25% by year-end, compared with an October forecast of 0.75%.
“The market is going with the idea that the chances of a Bank of England rate hike are increasing,” Forex.com’s Dolan said. “The move is not done yet. The pound is not giving back very much.”
Australia’s dollar rose to a level stronger than parity with the greenback for the first time in three days as the Reserve Bank of Australia said the global economy looks strong and there are signs of rising private investment in the nation amid higher commodity prices.
The central bank left its cash target at 4.75% and signaled inflation was likely to remain within its 2% to 3% target range in the year ahead.

A decidedly positive tone among market participants has the S&P 500 up sharply to its best level in more than two years. The ascent has been steady and broad based.
Buying has been steady and broad based, such that almost 90% of the names in the S&P 500 are in higher ground. Of the major sectors, only utilities (+0.5%), consumer staples (+0.8%), and telecom (+0.8%) have gained less than 1%. Such strength has helped the benchmark Index push through resistance along the 1300 line to its best level since September 2008.

EUR/USD continues to etch fresh highs for the session with gains to $1.3815 area. Offers were noted at $1.3820/30, though we are told too of some stops mixed into the same zone. Area of $1.3820 also the Nov 11 high in the pair.

EUR/USD: $1.3750, $1.3700, $1.3680, $1.3600, $1.3800
USD/JPY: Y82.05
EUR/JPY: Y112.00, Y111.60   
GBP/USD: $1.6040, $1.5980, $1.5900
AUD/USD: $1.0025, $0.9900, $0.9800

The dollar fell for a second day against the euro as Asian stocks advanced on speculation the worldwide economic recovery is building momentum, reducing demand for safer assets.
MSCI Asia Pacific Index of shares rose 0.3% and the Nikkei 225 Stock Average advanced 0.4%.
The number of people out of work in Germany fell 10,000 in January, after rising 3,000 in December, a separate survey showed before the data today.
“Worldwide growth is looking strong,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “This is likely to support risk appetite and weigh on the dollar and the yen while boosting the euro.”
The pound gained after the National Institute for Economic and Social Research predicted the U.K.’s benchmark rate would rise to 1.25% by year-end, compared with an October forecast of 0.75%. The institute increased its 2011 inflation forecast to 3.8% from 2.8%.
Australia’s dollar climbed after the central bank said there are signs of rising private investment in the nation.

Economists predict a U.S. report today will show manufacturing grew for an 18th month. The Institute for Supply Management’s factory index was 58 in January from an eight-month high of 58.5 in December. Readings above 50 signal growth.

USD/JPY
Offers:Y82.00, Y82.20/30, Y83.00/10, Y83.70
Bids: Y81.30/20, Y81.00

EUR/JPY
Offers: Y112.70, Y113.00, Y113.50/60, Y114.00
Bids: Y112.00, Y111.80, Y111.40

AUD/USD
Offers:$1.0085/90 (stops), $1.0125, $1.0213
Bids: $0.9850

The outlook remains negative. The 'AAA' transfer and convertibility assessment is unchanged.

The outlook remains negative. The 'AAA' transfer and convertibility assessment is unchanged.

EUR/SEK Sek8.9000
EUR/NOK Nok7.9000

Trades through earlier highs at $1.6080 as rate reacts to the release of stronger than forecast UK mfg PMI data. Rate extends recent recovery to the offers seen to $1.6120. A break to open a move toward $1.6150/55.