Market Drivers for February 14, 2014
European GDP prints better taking euro through 1.3700
Nikkei off -1.53% dragging USD/JPY to another test of 101.50
Nikkei -1.53% Europe 0.00%
Oil $99/bbl
Gold $1308/oz.

Europe and Asia:
CNY CPI 2.5% vs. 2.4%
EUR FR GDP 0.3% vs. 0.2%
EUR GE GDP 0.4% vs. 0.3%

North America:
USD Import Prices 8:30 AM
CAD Manufacturing Sales 8:30 AM
USD IP 9:15 AM
USD U of M 9:55 AM

The dollar was markedly weaker across the board on the last trading day of the week as the drop in the Nikkei sent USD/JPY tumbling to a test of 101.50 lows while better than expected GDP data out of Europe helped to lift euro through the key 1.3700 level.

It was a bit of schizophrenic night in the currency market with risk off flows dominating in Asian trade after Nikkei plunged as much as -2% in afternoon trade finally finishing of at -1.53% for the day. The move helped to drag USD/JPY to 101.57, but the pair held just above the spike lows of 101.50 made last Friday in the wake of US NFP report.

With US data continuing to disappoint in part due to tough weather conditions that have dominated the East Coast wreaking havoc with economic activity, USD/JPY has been under pressure for most of the week, unable to recapture the 103.00 level as every rally has been repelled. For now the 101.50 support is holding, but a break of those levels opens up the prospect of further declines and a possible test of the key 100.00 level as investors become disenchanted with US growth.

Meanwhile in Europe the news was considerably better as upside surprises in French and German GDPs and French employment helped to lift the euro through the 1.3700 level. French data provided the spark for the rally with GDP rising 0.3% from 0.2% eyed while payrolls expanded to 0.1% versus -0.1% forecast.

The news suggests that France – which only recently was viewed as one of the biggest trouble spots in the Eurozone – may be on the road to recovery. A pickup in activity in Eurozone’s second largest economy would alleviate the pressure on ECB to ease further and as a result the EUR/USD remained strongly bid hitting a high of 1.3715 before receding a bit in morning London dealing.

If addition to the euro, the Aussie and the pound also saw strong rallies as the night progressed with the former recapturing the 9000 level as the short squeeze continued while the later hit fresh yearly highs at 1.6717 on optimism over UK growth prospects.

With dollar clearly on the defensive the North American session now sets up as test of the greenback support. The eco calendar is relatively quiet with only Industrial Production and Capacity Utilization on the docket, but the true focus is likely to fall on the U of M data due at 14;55 GMT. Consumer sentiment numbers could provide a clue as to the toll that weather is taking on US economic activity. The market is looking for no change, but if the data prints below the 80.00 mark it could trigger yet another round of dollar selling and push USD/JPY below the key 101.50 support.

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