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North American equities snapped their six-day winning streak yesterday, with the S&P shaving off 0.22% from its valuation, while  safe-haven’s like the Japanese Yen gained strength.   Soft macro-economic data out of the US acted as the catalyst for investors to eye some profit-taking opportunities, as New Home Sales in the US over the month of March fell by 14.5%, and the US Manufacturing PMI missed expectations coming  in at 55.4, down from last month’s reading of 55.5.   The wash-out was hardly violent, as yields on the 10-year US treasury finished the day essentially  flat  trading just below 2.7%, and the cash VIX increased by 0.61% while the rest of the curve flattened.

In Ukraine news, it appears as if the region is close to securing a deal with the IMF to get its  hands on some  much needed cash to help pay its bills this year.   According to an unnamed source at the IMF the staff has endorsed a $17bn loan package to Ukraine, that will be voted on at an  April 30th  board meeting.    Elsewhere, it has been reported that fighting between the Ukrainian military and pro-Russian rebels has broken out again, with  skirmishes igniting around the town of  Slavyansk as Ukraine looks to  proceed with  their anti-terrorism campaign.   Obviously Putin is not happy about  what is transpiring and at a meeting with media in St. Petersburg said that the use of force in Ukraine  “would have consequences.”

One of the main focuses overnight was the survey from the Ifo Institute on German business climate, which comes right on the heels of the better than expected PMIs in the region that were released yesterday.   The strong numbers in both the manufacturing and service sectors of the Germany economy helped drag the composite reading of the entire zone to its highest level since May of 2011, which is important because of how closely PMI tracks ahead of GDP growth for the common-currency bloc.    The  upward trajectory of PMI prints bodes well for the potential to see stronger GDP growth in Q1, and barring a  large downward surprise on flash CPI released next week, could hold the European Central Bank back from taking  any action at their next policy meeting.   The results from the Ifo survey came in better than expected at 111.12, handily beating the median  analyst forecast of 110.5, as the positive mood around the Germany economy trumps the crisis in Ukraine

The  recent resilience of the EUR can partly be attributed to the inaction of the ECB, with the board members  confident the dis-inflationary pressures are transitory in nature, and will  bottom out as we enter the summer months.   Trying to  play the short-side of the EUR has been a painful task over the last six  months, and should the flash CPI reading signal a bottom might be in place,  EURUSD has the ability to make another run at the 1.40 handle; although  it is around this level we feel ECB  board members could get a little skittish around the EUR’s strength and try to jawbone the market back down.   To that end, Mario Draghi was  speaking today, and during his address hit on all the usual dovish talking points.   Draghi did mention that the ECB could pursue monetary policy if tensions persisted in bond and money markets (referring to excess liquidity in the system dropping below  EUR 100bn and EONIA trading at about two times the  effective  Fed Funds rate), but held back from mentioning any policy action was imminent.   EURUSD is  essentially flat this morning just above the 1.3800 level, as the opposing forces of a bullish Ifo survey and a dovish Draghi keep the pair in check.   The major  equity  bourses have perked back up, trading well in positive territory ahead of the North American cross.

Heading into the North American open, equity futures are reversing yesterday’s losses as positive earning surprises from such companies as Facebook, Apple,  and Caterpillar have investors looking  to increase their exposure to stocks.   Also adding to the positive market sentiment  durable goods orders in the US for the month of March came in with strong beats across the board.   The headline reading increased by 2.6% (vs. expectations of 2.0%) while the business investment proxy of non-defense, ex-air increased by  2.2% (vs. expectations of 1.5%.)   The Loonie is  slightly stronger against the USD this morning,  benefiting  from positive risk appetite that has equities and high-yield well bid, although  USDCAD is still within the  range its been contained to all week in the low 1.10s.   With a relatively quiet end to the week, especially with the subdued volatility seen in currency markets, make sure to speak with your  dealing teams around strategy heading into next week, as there are a great deal of event risks that could vastly shake-up the dull trading we seen this week

Further reading:

US jobless claims jump to 329K but durable goods orders jump as well

Euro-zone QE: How about buying Gold?