USD firms as risk sentiment still shaky
What happened overnight
– LDP leader suggests revising BOJ law to force aggressive easing
– CDU, Bundesbank president emphasize temporary nature of OMT
– Euro zone trade balance continues to improve
The USD and JPY are broadly firmer, consistent with a still-shaky equity market environment. EURUSD has retreated back to 1.2724 lows, while AUDUSD has continued to slide back towards 1.03. Equity markets have continued to rally in Tokyo amid hopes for more simulative monetary and fiscal policy, but most markets in Europe are lower and the S&P future is off 0.3%. Italian and Spanish sovereign yields are stable, but the Spanish 10-year yield remains 6bp higher on net this week.
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