Yesterday was generally a risk-on session in foreign currency markets, as the European Central Bank adopted a somewhat more neutral bias than some might have been hoping for, but left the door open to further accommodation should the data flow unexpectedly worsen significantly.

That was enough to send the single currency higher, towards 1.31. Commentary from analysts regarding the outlook for the single currency however seems to continue to be rather downbeat.

Nevertheless, the above is also, in part, a function of dollar strength, as the US currency unit begins to have a positive correlation with robust US economic data.

The US dollar index is thus now near 6 month highs.

In that regard, much was made of the fact that the dollar/yen currency pair rose above the 95 yen mark during the session, to stand at its best levels since late 2009.

The US data flow was rather 'mixed.' Consumer credit rose by $16.2bn, ahead of expectations, in January.

On the other hand, the trade deficit expanded by more than was expected in January, to reach -$44.45bn versus -$38.5bn in the month before. The consensus estimate had been for a reading of -$38.5bn.

Over in the Eurozone, German factory orders dropped by 1.9% month-on-month in January, far below the 0.6% gain expected by the consensus.

AB

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