Sentiment improved modestly as a more optimistic Germany's ZEW data was partly offset by weakness in US housing data. Japanese yen firmed mildly as investors took note of Financial Minister Aso's comments that the central bank is not intended to purchase foreign bonds to weaken the currency and ECB's/BUBA's Weidmann said that the G-20 sent a clear signal to oppose currency manipulation. The pound plunged to a 7-month low against the USD amid rumors that rating agencies would downgrade UK's AAA rating. Wall Street soared to near record high with the DJIA and the S&P 500 indices gaining +0.39% and +0.73% respectively. M&A talks served as a big catalyst to the rally. In the commodity sector, the front-month contract for WTI contract continued to move within a recent range of 94-99. The Comex gold contract remained weak, staying at around 1600.
Germany's ZEW confidence data improved in February with the economic sentiment index rising to 48.2 from 31.5 in January. The market had anticipated a milder rise to 35. Economic sentiment also rose to 42.4 during the month, compared with consensus of 35.5 and January's 31.2. Current situation however, slipped to 5.2 in February from 7.1 in January. In short, the set of data was well-received by the market and treated it as a sign of better outlook in the Eurozone's largest economy. In the US, the NAHB housing market index slid -1 point to 46 in February, compared with market expectations of a +1 point gain to 48.
Apart from encouraging data and positive sentiment, the +0.3% gain in the euro was also driven by comments from Bundesbank President Weidmann who stated that the ECB would not cut interest rates in order to weaken the euro. He stressed that G-20 officials have clarified that they are against currency manipulation and "in the future, difficult economic situations faced by some countries will not be addressed by protectionism or currency manipulation".
Today, the BOE would release the minutes for the last MPC meeting. At the February meeting, the BOE kept the Bank rate at 0.5% and the size of the asset purchase program at 375B pound. Surprisingly, the central bank delivered a long post-meeting statement, stressing that the MPC stands "ready to provide additional monetary stimulus if warranted". The US' FOMC minutes would probably unveiled more opinions opposing the continuation of the Fed's QE program.
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