• USD: Lower, jobless claims drop, equity markets rally, risk appetites improves on Greek bailout hope
• JPY: Lower, Japanese markets closed for holiday
• EUR: Higher, swift action expected on Greek aid to prevent a Greek debt default
• GBP: Higher, house prices rise, election uncertainty limits gains
• CAD and AUD: AUD & CAD higher, improving risk appetite, crude prices rise above $85 a barrel

Overview
The USD traded lower Thursday pressured by optimism that the EU and IMF are moving more quickly towards agreement on a large aid package for Greece. ECB officials called for quick approval of the Greek aid package to avoid contagion, German SPD party drops its opposition to Greek aid and Greek credit spreads narrowed. USD was also pressured by improving risk appetite as equity markets trade higher in reaction to Greek bailout hopes and Thursdays FOMC policy statement. The FOMC elected to maintain the status quo and was upbeat about the US economic recovery. EUR was also supported by positive economic data as Germany reports a sharp drop in jobless claims and improvement in economic sentiment. GBP traded higher supported by report of rising UK house prices with gains limited by UK election uncertainty. Commodity currencies traded higher supported by improving risk appetite and firmer crude prices. Japanese markets were closed for holiday and the JPY traded lower in reaction to improving risk sentiment. US jobless claims declined .The jobless claims report came in spot on market expectation.  Focus turns to Friday’s release of US advanced Q1 GDP and the Greek bailout package.

Today’s US data:
Initial jobless claims for week ending 4/24 declined by 11k to 448k, a reading of 448K was expected.

Upcoming US data:
On April 30th Q1 employment cost index, GDP, core PCE index, Chicago April PMI and April University of Michigan final consumer sentiment will be released. The Q1 employment cost index is expected unchanged at 0.5%. Advanced Q1 GDP is expected at 3.5% compared to 5.6% last quarter. Q1 core PCE is expected at 1.4% compared to 1.8% last quarter. Chicago PMI is expected at 60 compared to 58.8 last month and the Michigan consumer sentiment is expected unchanged at 69.5.

JPY
Japanese markets were closed for holiday. JPY traded mixed to lower pressured by improving risk sentiment and firmer equity markets. Equity markets traded higher in reaction to the FOMC’s reaffirmation of maintaining low yields for an extended period and optimism that a Greek aid package will soon be announced. The cost of financing the Greek debt dropped sharply as a Greek aid package is expected within days. EUR/JPY traded higher with the EUR supported by Greek optimism, improving EU economic sentiment and falling German jobless claims. GBP/JPY traded higher with GBP supported by report of rising UK house price. AUD/JPY traded higher supported by firmer equity market trade. JPY direction is expected to continue track equities. Focus turns to Friday’s release of Japan’s CPI and the BOJ’s semiannual economic outlook. The CPI is expected to post a modest rise and the BOJ is expected to upgrade its CPI and growth forecast.

On April 30th March CPI will be released expected to rise by 0.3% compared to -0.1% last month. March household spending, unemployment, industrial output, housing starts and construction orders will also be released on April 30th. Household spending is expected to decline by 0.7% compared to a 0.5% decline last month. The unemployment rate is expected unchanged at 4.9% with the participation rate rising to 59.1 from 58.9 last month and employment growth to decline by 100k. Industrial output is expected to rise by 1% compared to a 0.6% decline last month. Housing starts are expected to rise by 3% compared to 8% fall last month and construction orders are expected to decline by 6.4% compared to 20.3% last month.

 Key technical levels to watch in USD/JPY include support at 92.99 the April 28th low with resistance at 94.78 April 5th high.

 EUR
EUR traded higher supported by optimism that the EU and IMF will soon announce a large Greek rescue package and by positive EU and German economic data. ECB officials have turned up their rhetoric and call for quick action on aid to Greece to avoid a contagion from the Greek debt crisis. Press reports suggest that the Greek aid package could be as large as €120bln and that Greece is considering what type of austerity measures it will take to reduce its budget deficit. One report suggests that Greece may enact a VAT tax of 23 to 25% as a part of the rescue deal. The cost of financing the Greek debt declined today in reaction to Greek bailout hope with Greek/ German 10 year bond spread declining to 775 bps and the five-year credit default swap spread declined to 726bps. EU April economic sentiment improved to 100.6 from 97.9 last month. German April jobless fell by 68k, a 10k decline was expected. German unemployment rate declined 7.8% from 8% last month. March M3 growth came in at -0.1% compared to -0.3% of a percent last month. These reports confirm that the EU economic recovery is gaining momentum. Despite the recovery in the EU economy the ECB is expected to maintain steady policy because of concern about the impact of the Greek debt crisis. The EUR experience an additional relief rally when the Greek aid package is announced but the rally is likely to be temporary. New York professor Roubini warns that Greece may eventually be forced to leave the EU and this could spark additional selling of the EUR and make the EUR a less liquid currency. Bloomberg reports that investors are abandoning the EUR at a rate not seen since the collapse of Lehman Brothers and analysts at Morgan Stanley see potential that the EU may break up. If EU break up speculation gains momentum it could spark a new leg down for the EUR. Analysts at UBS forecast that EUR may be heading to 120.

On April 30th EU March unemployment will be released expected unchanged 10% along with April HICP expected at 1.5% compared to 1.4% last month.

The technical outlook for the EUR is negative as EUR breaks 1.3200. Expect EUR support at 1.3184 the April 29th 2009 low with resistance at 1.3395 the April 27th High.

GBP
GBP traded higher supported by report of rising UK house prices with gains limited by UK election uncertainty. UK April house prices rose by 1% and 10.5%y/y according to the Nationwide survey. The rise in UK house prices is further confirmation of improving UK economic outlook and may contribute to speculation that UK inflationary pressures are building. Earlier in the month the UK reported that its annual inflation rate rose by 3.4% in March which puts UK inflation above the high-end of the ECB’s 1 to 3% inflation target range. UK election uncertainty limits the scope of the BOE’s maneuverability on policy but if inflationary pressures continue to BOE may be forced to move to normalize monetary policy sooner than expected. The latest UK election polls continue to point towards a hung parliament with none of the three major parties gaining a majority. Lack of a majority in parliament could lead to gridlock and prevent quick action to reduce the UK budget deficit. Failure to reduce the UK budget deficit could result in the UK losing its AAA rating. Credit ratings were cut in Greece Portugal and Spain this week and NYU professor Roubini says that Ireland and the UK could be next. The last UK pre-election debate will be held tonight on economic policy and the election is scheduled for May 6th.GBP continues in a sideways pattern as investor’s debate the potential impact of the UK election, the UK budget outlook and uncertainty about BOE monetary policy.

The technical outlook for GBP is mixed as GBP struggles to hold above 1.5400. Expect near-term support at 1.5126 the April 28h low with resistance at 1.5487 the April 27th high.

CAD
CAD traded higher supported by rising crude prices and improving risk sentiment as global equity markets rally on news that a large Greek EU/IMF aid package will soon be announced. Crude prices traded back above $85 a barrel. CAD plunged in Tuesday’s trade tracking sharp drop in equities and commodities sparked by S&P downgrade of Portugal and Greek debt rating. The Greek debt crisis overshadows positive news from Canada. Private economists have raised their forecast for Canada’s 2010 GDP to 3.1% from 2.6% in the survey taken in December with exports expected to grow by 11% in 2010. These economists expect Canada’s unemployment rate to drop to 8.1% from original forecast of 8.5%.Canada’s March help wanted index rose by 5.7%. CAD traded higher despite a statement from BOC Governor Carney Thursday that BOC was prepared to intervene against excessive CAD because strong CAD hurts Canadian exports to drag on Canadian economic growth. CAD price direction will continue to track risk sentiment with gains possibly limited by threat of intervention and BOC policy uncertainty. Earlier in the month Carney said that he was open to a rate hike possibly as early as June. Carney testifies before the Canadian Parliament today and his testimony may dampen speculation of a June rate hike. Focus turns to Friday’s release of Canada’s GDP and raw material prices with investors looking to the data to gauge the probability of an earlier BOC rate hike.

This week’s Canadian economic calendar includes the April 30th release of Q1 GDP expected to rise by 0.8% compared to 0.6% last quarter. April raw material prices will be released on April 30th expected at 0.6% compared to 0.4% last month.

The technical outlook for CAD is mixed as USD/CAD trades above 1.0100. Look for near-term support at 1.0000 the April 27th low with resistance at 1.0302 the March 26th high.

AUD
AUD traded higher supported by improving risk sentiment sparked by Greek rescue hopes, Thursday’s decision by the Fed to maintain steady policy and RBA rate hike speculation.  ECB officials are urging the EU and IMF to take quick action on the Greek bailout package to prevent contagion from the Greek debt crisis. ECB’s Weber says that a Greek debt default would have severe consequences. The panic in the Greek financial markets eased a bit today on report that the EU and IMF are putting together a larger Greek rescue package. AUD was also supported by yield outlook as the Fed holds policy steady and the RBA is expected to hike rates next week. The RBA hiked rates by 25bps to 4.25% earlier this month. Report that the reserve Bank of New Zealand elected to hold monetary policy steady and issued a less hawkish policy statement appeared to limit the AUD rally. Thursday Australia reported higher than expected CPI. Australia’s Q1 CPI rose by 0.9%. The rise in CPI will increase pressure for the RBA to hike rates next week. The CPI report follows yesterday’s report of higher than expected Q1 PPI rise. Q1 PPI rose by 1%, a 0.6% rise was expected. The higher than expected CPI may increase the chance of an RBA rate hike at the May 4th policy meeting. AUD was also supported by a statement from RBA Deputy Governor Debelle that the EU sovereign debt crisis is having no impact on Australia.

On April 30th March private sector credit will be released expected unchanged at 0.4%. Next RBA policy meeting will be held on May 4th.

The technical outlook for the AUD is mixed as the AUD struggles to hold above 9300. Expect AUD support at 9131 the March 31st low with resistance at 9339 the April 21st high.

Read More

• USD: Lower, jobless claims drop, equity markets rally, risk appetites improves on Greek bailout hope
• JPY: Lower, Japanese markets closed for holiday
• EUR: Higher, swift action expected on Greek aid to prevent a Greek debt default
• GBP: Higher, house prices rise, election uncertainty limits gains
• CAD and AUD: AUD & CAD higher, improving risk appetite, crude prices rise above $85 a barrel

Overview
The USD traded lower Thursday pressured by optimism that the EU and IMF are moving more quickly towards agreement on a large aid package for Greece. ECB officials called for quick approval of the Greek aid package to avoid contagion, German SPD party drops its opposition to Greek aid and Greek credit spreads narrowed. USD was also pressured by improving risk appetite as equity markets trade higher in reaction to Greek bailout hopes and Thursdays FOMC policy statement. The FOMC elected to maintain the status quo and was upbeat about the US economic recovery. EUR was also supported by positive economic data as Germany reports a sharp drop in jobless claims and improvement in economic sentiment. GBP traded higher supported by report of rising UK house prices with gains limited by UK election uncertainty. Commodity currencies traded higher supported by improving risk appetite and firmer crude prices. Japanese markets were closed for holiday and the JPY traded lower in reaction to improving risk sentiment. US jobless claims declined .The jobless claims report came in spot on market expectation.  Focus turns to Friday’s release of US advanced Q1 GDP and the Greek bailout package.

Today’s US data:
Initial jobless claims for week ending 4/24 declined by 11k to 448k, a reading of 448K was expected.

Upcoming US data:
On April 30th Q1 employment cost index, GDP, core PCE index, Chicago April PMI and April University of Michigan final consumer sentiment will be released. The Q1 employment cost index is expected unchanged at 0.5%. Advanced Q1 GDP is expected at 3.5% compared to 5.6% last quarter. Q1 core PCE is expected at 1.4% compared to 1.8% last quarter. Chicago PMI is expected at 60 compared to 58.8 last month and the Michigan consumer sentiment is expected unchanged at 69.5.

JPY
Japanese markets were closed for holiday. JPY traded mixed to lower pressured by improving risk sentiment and firmer equity markets. Equity markets traded higher in reaction to the FOMC’s reaffirmation of maintaining low yields for an extended period and optimism that a Greek aid package will soon be announced. The cost of financing the Greek debt dropped sharply as a Greek aid package is expected within days. EUR/JPY traded higher with the EUR supported by Greek optimism, improving EU economic sentiment and falling German jobless claims. GBP/JPY traded higher with GBP supported by report of rising UK house price. AUD/JPY traded higher supported by firmer equity market trade. JPY direction is expected to continue track equities. Focus turns to Friday’s release of Japan’s CPI and the BOJ’s semiannual economic outlook. The CPI is expected to post a modest rise and the BOJ is expected to upgrade its CPI and growth forecast.

On April 30th March CPI will be released expected to rise by 0.3% compared to -0.1% last month. March household spending, unemployment, industrial output, housing starts and construction orders will also be released on April 30th. Household spending is expected to decline by 0.7% compared to a 0.5% decline last month. The unemployment rate is expected unchanged at 4.9% with the participation rate rising to 59.1 from 58.9 last month and employment growth to decline by 100k. Industrial output is expected to rise by 1% compared to a 0.6% decline last month. Housing starts are expected to rise by 3% compared to 8% fall last month and construction orders are expected to decline by 6.4% compared to 20.3% last month.

 Key technical levels to watch in USD/JPY include support at 92.99 the April 28th low with resistance at 94.78 April 5th high.

 EUR
EUR traded higher supported by optimism that the EU and IMF will soon announce a large Greek rescue package and by positive EU and German economic data. ECB officials have turned up their rhetoric and call for quick action on aid to Greece to avoid a contagion from the Greek debt crisis. Press reports suggest that the Greek aid package could be as large as €120bln and that Greece is considering what type of austerity measures it will take to reduce its budget deficit. One report suggests that Greece may enact a VAT tax of 23 to 25% as a part of the rescue deal. The cost of financing the Greek debt declined today in reaction to Greek bailout hope with Greek/ German 10 year bond spread declining to 775 bps and the five-year credit default swap spread declined to 726bps. EU April economic sentiment improved to 100.6 from 97.9 last month. German April jobless fell by 68k, a 10k decline was expected. German unemployment rate declined 7.8% from 8% last month. March M3 growth came in at -0.1% compared to -0.3% of a percent last month. These reports confirm that the EU economic recovery is gaining momentum. Despite the recovery in the EU economy the ECB is expected to maintain steady policy because of concern about the impact of the Greek debt crisis. The EUR experience an additional relief rally when the Greek aid package is announced but the rally is likely to be temporary. New York professor Roubini warns that Greece may eventually be forced to leave the EU and this could spark additional selling of the EUR and make the EUR a less liquid currency. Bloomberg reports that investors are abandoning the EUR at a rate not seen since the collapse of Lehman Brothers and analysts at Morgan Stanley see potential that the EU may break up. If EU break up speculation gains momentum it could spark a new leg down for the EUR. Analysts at UBS forecast that EUR may be heading to 120.

On April 30th EU March unemployment will be released expected unchanged 10% along with April HICP expected at 1.5% compared to 1.4% last month.

The technical outlook for the EUR is negative as EUR breaks 1.3200. Expect EUR support at 1.3184 the April 29th 2009 low with resistance at 1.3395 the April 27th High.

GBP
GBP traded higher supported by report of rising UK house prices with gains limited by UK election uncertainty. UK April house prices rose by 1% and 10.5%y/y according to the Nationwide survey. The rise in UK house prices is further confirmation of improving UK economic outlook and may contribute to speculation that UK inflationary pressures are building. Earlier in the month the UK reported that its annual inflation rate rose by 3.4% in March which puts UK inflation above the high-end of the ECB’s 1 to 3% inflation target range. UK election uncertainty limits the scope of the BOE’s maneuverability on policy but if inflationary pressures continue to BOE may be forced to move to normalize monetary policy sooner than expected. The latest UK election polls continue to point towards a hung parliament with none of the three major parties gaining a majority. Lack of a majority in parliament could lead to gridlock and prevent quick action to reduce the UK budget deficit. Failure to reduce the UK budget deficit could result in the UK losing its AAA rating. Credit ratings were cut in Greece Portugal and Spain this week and NYU professor Roubini says that Ireland and the UK could be next. The last UK pre-election debate will be held tonight on economic policy and the election is scheduled for May 6th.GBP continues in a sideways pattern as investor’s debate the potential impact of the UK election, the UK budget outlook and uncertainty about BOE monetary policy.

The technical outlook for GBP is mixed as GBP struggles to hold above 1.5400. Expect near-term support at 1.5126 the April 28h low with resistance at 1.5487 the April 27th high.

CAD
CAD traded higher supported by rising crude prices and improving risk sentiment as global equity markets rally on news that a large Greek EU/IMF aid package will soon be announced. Crude prices traded back above $85 a barrel. CAD plunged in Tuesday’s trade tracking sharp drop in equities and commodities sparked by S&P downgrade of Portugal and Greek debt rating. The Greek debt crisis overshadows positive news from Canada. Private economists have raised their forecast for Canada’s 2010 GDP to 3.1% from 2.6% in the survey taken in December with exports expected to grow by 11% in 2010. These economists expect Canada’s unemployment rate to drop to 8.1% from original forecast of 8.5%.Canada’s March help wanted index rose by 5.7%. CAD traded higher despite a statement from BOC Governor Carney Thursday that BOC was prepared to intervene against excessive CAD because strong CAD hurts Canadian exports to drag on Canadian economic growth. CAD price direction will continue to track risk sentiment with gains possibly limited by threat of intervention and BOC policy uncertainty. Earlier in the month Carney said that he was open to a rate hike possibly as early as June. Carney testifies before the Canadian Parliament today and his testimony may dampen speculation of a June rate hike. Focus turns to Friday’s release of Canada’s GDP and raw material prices with investors looking to the data to gauge the probability of an earlier BOC rate hike.

This week’s Canadian economic calendar includes the April 30th release of Q1 GDP expected to rise by 0.8% compared to 0.6% last quarter. April raw material prices will be released on April 30th expected at 0.6% compared to 0.4% last month.

The technical outlook for CAD is mixed as USD/CAD trades above 1.0100. Look for near-term support at 1.0000 the April 27th low with resistance at 1.0302 the March 26th high.

AUD
AUD traded higher supported by improving risk sentiment sparked by Greek rescue hopes, Thursday’s decision by the Fed to maintain steady policy and RBA rate hike speculation.  ECB officials are urging the EU and IMF to take quick action on the Greek bailout package to prevent contagion from the Greek debt crisis. ECB’s Weber says that a Greek debt default would have severe consequences. The panic in the Greek financial markets eased a bit today on report that the EU and IMF are putting together a larger Greek rescue package. AUD was also supported by yield outlook as the Fed holds policy steady and the RBA is expected to hike rates next week. The RBA hiked rates by 25bps to 4.25% earlier this month. Report that the reserve Bank of New Zealand elected to hold monetary policy steady and issued a less hawkish policy statement appeared to limit the AUD rally. Thursday Australia reported higher than expected CPI. Australia’s Q1 CPI rose by 0.9%. The rise in CPI will increase pressure for the RBA to hike rates next week. The CPI report follows yesterday’s report of higher than expected Q1 PPI rise. Q1 PPI rose by 1%, a 0.6% rise was expected. The higher than expected CPI may increase the chance of an RBA rate hike at the May 4th policy meeting. AUD was also supported by a statement from RBA Deputy Governor Debelle that the EU sovereign debt crisis is having no impact on Australia.

On April 30th March private sector credit will be released expected unchanged at 0.4%. Next RBA policy meeting will be held on May 4th.

The technical outlook for the AUD is mixed as the AUD struggles to hold above 9300. Expect AUD support at 9131 the March 31st low with resistance at 9339 the April 21st high.

FX Highlights

• The USD is trading lower pressured by report that Greece is negotiating with the EU and IMF to secure a larger three-year aid package and by improving risk sentiment as stock markets rally in reaction to the FOMC policy statement, talks on Greek aid are expected to be completed within days, EUR supported by improving economic sentiment, German employment data and the narrowing of the Greek/German ten year bond spread, USD downside was limited by statement from EU Monetary Commissioner Rehn that he cannot give details of the Greek deal today, GBP supported by report of rising UK house prices with gains limited by UK election uncertainty, commodity currencies supported by improving risk appetite and firmer crude, Japanese markets were closed for holiday, JPY trades lower pressured by improving risk appetite
• Focus turns to today’s release of US jobless claims
• The Fed maintained steady rate policy and made no changes to “extended period” policy language, economic activities continue to strengthen, pace of economic recovery likely to stay moderate for some time, household spending picking up but remains constrained by modest income growth high unemployment and tight credit, labor markets beginning to improve, housing starts have edged up, financial market conditions remain supportive of growth, inflation to remain subdued for some time, Kansas City Fed Hoenig president dissented in the vote
• EU April economic sentiment rose to 100.6 from 97.9 last month, German April jobless declined by 68k, Greek/German ten year bond spread narrowed to 775 bps on Greek bailout hopes, ECB officials urge support for Greece to avoid contagion risk, EUR higher
• UK April house prices rose 1%, GBP higher
• Labor department says that unemployment fell or remained level in the majority of major cities in March which suggests the recovery is spreading
• Fitch leaves it rating unchanged for Spain at AAA
• One month USD Libor rates rose above 1% for the first time in a year as markets begin to price expectation of a Fed rate hike by year end
• US equity markets set to open higher, European equities 1% higher, Nikkei closed for holiday

Upcoming Events

• US-Thursday, initial jobless claims for week ending 04/24 will be released expected at 445k compared to 456k last week
• CAN-Thursday, no major Canadian economic data is due for release today

Read More

FX Highlights

• The USD is trading lower pressured by report that Greece is negotiating with the EU and IMF to secure a larger three-year aid package and by improving risk sentiment as stock markets rally in reaction to the FOMC policy statement, talks on Greek aid are expected to be completed within days, EUR supported by improving economic sentiment, German employment data and the narrowing of the Greek/German ten year bond spread, USD downside was limited by statement from EU Monetary Commissioner Rehn that he cannot give details of the Greek deal today, GBP supported by report of rising UK house prices with gains limited by UK election uncertainty, commodity currencies supported by improving risk appetite and firmer crude, Japanese markets were closed for holiday, JPY trades lower pressured by improving risk appetite
• Focus turns to today’s release of US jobless claims
• The Fed maintained steady rate policy and made no changes to “extended period” policy language, economic activities continue to strengthen, pace of economic recovery likely to stay moderate for some time, household spending picking up but remains constrained by modest income growth high unemployment and tight credit, labor markets beginning to improve, housing starts have edged up, financial market conditions remain supportive of growth, inflation to remain subdued for some time, Kansas City Fed Hoenig president dissented in the vote
• EU April economic sentiment rose to 100.6 from 97.9 last month, German April jobless declined by 68k, Greek/German ten year bond spread narrowed to 775 bps on Greek bailout hopes, ECB officials urge support for Greece to avoid contagion risk, EUR higher
• UK April house prices rose 1%, GBP higher
• Labor department says that unemployment fell or remained level in the majority of major cities in March which suggests the recovery is spreading
• Fitch leaves it rating unchanged for Spain at AAA
• One month USD Libor rates rose above 1% for the first time in a year as markets begin to price expectation of a Fed rate hike by year end
• US equity markets set to open higher, European equities 1% higher, Nikkei closed for holiday

Upcoming Events

• US-Thursday, initial jobless claims for week ending 04/24 will be released expected at 445k compared to 456k last week
• CAN-Thursday, no major Canadian economic data is due for release today

• USD: Higher, optimism about the US and global recovery competes with Greek debt worries
• JPY: Lower, improving risk sentiment, corporate goods prices rise
• EUR: Lower, Greek German bond spread widens to a new record high
• CHF: Lower, Jordan says rates are right for now, reaffirms SNB commitment to stop CHF appreciation
• GBP: Higher, house prices rise, conservative party expands their lead
• CAD and AUD: AUD higher & CAD lower, tracking equities, RBA and BOC policy uncertainty limit gains

Overview  
USD starts the week mixed with EUR pressured by pessimism about the Greek aid plan. Greek German ten-year bond spreads widened to a new record high. The growth led currencies outperform supported by optimism about the global recovery as equity markets rise. Improving US economic data and a statement from the G-20 that the global recovery has been better than expected fuels demand for equities and encourages risk appetite. AUD and CAD gains limited by RBA and BOC policy uncertainty and weaker crude prices. GBP traded higher supported by report of rising UK house prices and BOE rate hike speculation. JPY traded lower pressured by improving risk appetite sparked by a surge in the Nikkei. No major US economic data was released in today’s trade. Focus turns to the FOMC policy meeting Tuesday/Wednesday and further developments on the Greek aid package. Today’s press is filled with negative articles about Greek debt worries which include conflicting reports about the type and timing of aid for Greece, German reticence to provide aid to Greece, fears that the Greek debt crisis will spread and one report suggests pressure is mounting for Greece to leave the EU. Canada’s Finance Minister Flaherty said the G-20 fears the current Greek aid plan is insufficient. The FOMC is expected to hold policy steady and may announce the start of asset sales. Signs of global recovery compete with Greek debt worries for FX price direction.

Today’s US data:
No major economic data was released in today’s trade.

Upcoming US data:
This week’s US economic calendar includes the April 27th release of February Case Shiller Home Price Index expected to rise by 0.5% compared to the 0.7% decline last month. April consumer confidence will also be released on the 27th expected to rise to 54.2 from 52.5 last month. FOMC policy meeting will be held on April 27/28th. No policy change is expected. On April 29th initial jobless claims for the week ending 4/24 will be released expected at 448k compared to 456k last week. On April 30th Q1 employment cost index, GDP, core PCE index, Chicago April PMI and April University of Michigan final consumer sentiment will be released. The Q1 employment cost index is expected unchanged at 0.5%. Advanced Q1 GDP is expected at 3.5% compared to 5.6% last quarter. Q1 core PCE is expected at 1.4% compared to 1.8% last quarter. Chicago PMI is expected at 60 compared to 58.8 last month and the Michigan consumer sentiment is expected unchanged at 69.5.

JPY
JPY traded lower pressured by improving risk appetite as the Nikkei closed to 251 points higher. Recent improvement in US housing and jobs data, the G-20 communicate which said that the global recovery is better than anticipated and  NABE report which expressed optimism about the US economy and job creation combined to fuel today’s stock market rise and improving risk appetite. Additionally, the Nikkei may have benefited from report that the FSA plans to extend restrictions on short selling of stocks. JPY downside was limited by gains in cross trade to EUR with the EUR pressured by ongoing uncertainty about the Greek debt situation and higher inflation. March corporate service price index rose by 0.5%. The rise in corporate good prices may be a sign that deflationary pressures are abating. Last week Japan reported a widening of its trade surplus as exports surge. The surge in exports is confirmation of improving outlook for Japan’s economy. Improving outlook for Japan’s economy coupled with today’s report of higher corporate good prices will reduce the likelihood of additional easing measures by the BOJ. Focus turns to the start of the two-day FOMC policy meeting Tuesday and April 30th release of Japan’s CPI. The FOMC meeting and Japan’s CPI report will be key to the outlook for Fed in BOJ policy. JPY remains vulnerable to widening of yield differential as the Fed is seen moving closer to withdrawing liquidity and the BOJ is expected to remain on hold for the remainder of the year. JPY direction is expected to continue track equities.

This week’s Japanese economic calendar includes the April 28th release of March retail sales expected to fall by 1.1% compared to 0.9% rise last month. On April 30th March CPI will be released expected to rise by 0.3% compared to -0.1% last month. March household spending, unemployment, industrial output, housing starts and construction orders will also be released on April 30th. Household spending is expected to decline by 0.7% compared to a 0.5% decline last month. The unemployment rate is expected unchanged at 4.9% with the participation rate rising to 59.1 from 58.9 last month and employment growth to decline by 100k. Industrial output is expected to rise by 1% compared to a 0.6% decline last month. Housing starts are expected to rise by 3% compared to 8% fall last month and construction orders are expected to decline by 6.4% compared to 20.3% last month.

Key technical levels to watch in USD/JPY include support at 93.31 the April 23rd low with resistance at 94.78 April 5th high.

EUR
EUR drifted lower pressured by uncertainty about the timing and details of the Greek aid plan. Pessimism about the Greek aid plan sparked widening of the Greek/German 10 year bond spread to a new record high of 633bps. The widening of the Greek German bond spread increases the cost of funding the Greek debt. There are numerous press reports raising concern about the Greek debt outlook with some German officials warning that Germany could reject aid for Greece and that Germany is not ready to write a blank check for Greece. In addition The Times reports that the Greek meltdown is in danger of spreading and the Financial Times reports that this is the most important week in the EMU’s history. Harvard professor Rogoff says that the Greek rescue won’t be the last as focus will shift to Ireland and Spain. ECB’s Nowotny says that interest rates are adequate but he warns that divergence of EU economies could complicate monetary policy. Nowotny went on to say that he expects the central bank to make no policy changes for the foreseeable future as price pressures remain subdued. He downplayed the risk of contagion from the Greek debt crisis.  Investors will be watching closely to see if Germany seeks to hold back on the bailout. In a statement today German Chancellor Merkel gave few clues about Germany’s aid plans for Greece

This week’s EU economic calendar includes the April 29th release of EU business climate expected at 99.8 compared to 99.6 last month. On April 30th EU March unemployment will be released expected unchanged 10% along with April HICP expected at 1.5% compared to 1.4% last month.

The technical outlook for the EUR is negative as EUR struggles to hold above 1.3300. Expect EUR support at 1.3206 the April 23rd high with resistance at 1.3422 the April 22nd High.

CHF
CHF drifted lower as the SNB’s Jordan reiterates the central bank’s commitment to stop CHF appreciation. Jordan said that interest rates are right for now and he is against excessive CHF rise. For the year the CHF is down about 5% versus the USD and remains near record high versus the EUR.CHF gains versus the EUR are attributed to safe haven flows as investors seek shelter from the turmoil of the Greek debt crisis. The SNB has been defending EUR/CHF cross around 1.4300 with intervention or the threat of intervention. Because of intervention the SNB’ EUR holdings rose to 56.4bln in the first quarter. Recent Swiss economic data points to a recovery in the Swiss economy with rising inflation. This may encourage the SNB to begin to move towards policy normalization. At the last SNB policy meeting the SNB upgraded its outlook for the Swiss economy and expressed concern about rising house prices. Last week the SNB reported that producer and import prices stopped falling. Jordan’s comments suggest that the SNB is still taking a wait-and-see approach to monetary policy despite improving economy and rising prices. Jordan went onto say that the SNB is keeping close eye on the mortgage market. This week’s Swiss economic calendar includes the March UBS consumption indicator due for release Tuesday expected at 1% compared to 1.2% last month. On Friday April KOF indicator will be released expected it 1.98 compared to 1.93 last month CHF price direction and has re- linked with risk sentiment. Expect USD /CHF support at 1.0674 the April22nd low with resistance at 1.0955 the July 6th high.

GBP
GBP traded higher supported by report of rising UK house prices and sharp gains in cross trade to the EUR. Hometrack reports that UK house prices rose by 0 .2% last month. Although the house price rise was modest the data suggest that the UK economy continues to recover and the report follows last week’s release of higher than expected UK inflation. UK March inflation rose by 3.4%, well above the 3% limit of the UK government’s inflation target range. The combination of improving UK domestic economy and rising inflation increases the likelihood that the Bank of England may raise interest rates before year-end. GBP gains in cross trade to the EUR are attributed to ongoing worries about the Greek debt outlook as the cost of financing the Greek debt rises to new record high. GBP was also supported by the latest UK election polls which suggest that the Conservatives lead with 34% of the vote. The Conservatives have pledged to take quick action to cut the UK deficit. GBP has underperformed pressured by concern that the UK election could lead to a hung parliament. A hung Parliament would be less inclined to take quick action to reduce the UK deficit. Failure to reduce the UK deficit could lead to a downgrade in the AAA debt rating.

On April 29th April GFK consumer confidence will be released expected at -12 compared to-15 last month.

The technical outlook for GBP is mixed as GBP struggles to hold above 1.5400. Expect near-term support at 1.5290 the April 20th low with resistance at 1.5575 the February 23rd high.

CAD
CAD traded mixed with support from firmer equity market trade and Yuan revaluation speculation. As noted above the G-20 communiqué said the global recovery was faster than expected and the National Association for Business Economics (NABE) Expressed optimism about the prospects for US growth. The NABE cited better earnings and job creation with GDP expected to grow by more than 2% this year. The G-20 communiqué and the NABE report fueled demand for equities and contributed to improving risk appetite. Canada’s Finance Minister Flaherty said that it is increasingly likely that China will revalue the Yuan. Yuan revaluation could be a boon for global exports and demand from China. CAD gains were limited by weaker crude prices. CAD is consolidating near parity versus the USD supported by improving Canadian domestic economy and BOC rate hike speculation. Last week the BOC elected to hold rate policy steady, raised its 2010 GDP forecast to 3.7% and ended its commitment to maintain low rates. The BOC policy statement says that the Canadian recovery was somewhat more rapid than expected and the BOC dropped the language in its policy statement that interest rates would remain low through June 2010 conditional on inflation. Dropping the conditional inflation language in its policy statement is a shift in BOC policy and a signal that interest rates will soon be raised. The BOC policy statement was seen as more aggressive than expected and could lead to an earlier than expected rate hike. Last week Canada reported weaker than expected inflation and retail sales. Canada’s annual inflation rate slowed to 1.4% from 1.6% last month with the core inflation declining by 0.2%. Canada’s retail sales rose by 0.5% in February, a 0.8% rise was expected. These reports may dampen BOC rate hike speculation. Canadian inflation and retail sales data suggest that the BOC may not be in a hurry to withdraw stimulus. This week’s Canadian economic calendar is relatively light with investors looking to the data to gauge the probability of an earlier BOC rate hike.

This week’s Canadian economic calendar includes the April 30th release of Q1 GDP expected to rise by 0.8% compared to 0.6% last quarter. April raw material prices will be released on April 30th expected at 0.6% compared to 0.4% last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0000. Look for near-term support at 0.9931 the April 21st low with resistance at 1.0164 the April 20th high.

AUD
AUD traded higher as firmer equity markets fueled demand for growth led currencies. Optimism about the US and global recovery contributes to improvement in risk appetite and demand for commodity currencies. AUD has been firming supported by RBA rate hike speculation. Late last week AUD rally stalled in reaction to statements from the RBA which generate doubts that the RBA will hike rates next month. RBA Governor Stevens said that interest rates are close to the average and the future course of rates is an open question. His comments dampen speculation that the RBA will raise interest rates again next month. Last Thursday Australia reported weaker than expected vehicle sales with March new vehicle sales declining by 2.7%.The decline in vehicle sales may dampen enthusiasm about the strength of the Australian economic recovery and also dampen RBA rate hike speculation. AUD price direction is closely tracking risk appetite with recent gains are attributed to RBA rate speculation. The RBA hiked rates by 25bps to 4.25% earlier this month. Last Thursday, Australia reported that inflation expectations rose to the highest level since October 2008. The rise in Australia’s inflation expectations could add pressure on the RBA to hike rates. RBA Governor Stevens’s comments cloud the outlook for RBA policy and may tip the scales in favor of a steady rate decision in April.

This week’s Australian economic calendar includes the April 27th release of Q1 PPI expected at 0.7% compared to -0.4% last month and the April 28th release of Q1 CPI expected to rise by 0.8% compared to 0.5% last quarter. On April 29th February leading Index will be released expected at 0.1% compared to -0.2% last month and Q1 business conditions expected it 14 compared to 13 last month. On April 30th March private sector credit will be released expected unchanged at 0.4%. Next RBA policy meeting will be held on May 4th.

The technical outlook for the AUD is mixed as the AUD struggles to hold above 9300. Expect AUD support at 9157 the April 19th low with resistance at 9365 the April 15th high.