With the exception of USD/JPY, currencies and equities are trading slightly higher this morning as better than expected German retail sales and the lack of panic on the first day that Cyprus banks have reopened eased concerns in the financial markets and stabilized the EUR. The strict capital controls put in place has gone a long way in preventing bank runs today. The slightly weaker U.S. economic reports also didn’t cause too much of a stir in the FX markets. In fact, USD/JPY recovered its initial losses and rose to intraday high post release.

GDP growth in the U.S. was revised higher for the fourth quarter to 0.4% from 0.1%. Economists were looking for a slightly stronger print but personal consumption was revised lower. Jobless claims also rose to 357K from an upwardly revised 341K. While this was the largest miss in claims in 4 months, it is still a relatively low number that won’t raise too many eyebrows inside the Fed. Over the past few weeks, claims have been abnormally low and 350K is more consistent with the overall state of the labor market. Pending home sales will be released later this morning but we don’t expect any major surprises. Given the weakness in new and existing home sales, pending homes will most likely decline.

Meanwhile up North, the Canadian economy grew by 0.2% in the month of January. On an annualized basis, this translates into GDP growth of 1.0% versus 0.7% the previous month. While the data was strong enough to help the CAD hold onto its gains, a larger upside surprise was needed to increase the momentum of the downtrend in USD/CAD. The 1.4% increase in industrial product prices and 2.2% increase in raw material prices however verify the increase in inflationary pressures last month. For the Bank of Canada, slightly stronger GDP growth and hotter inflation pressures will leave their hawkish monetary policy stance intact.

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