Currency markets are mixed this morning, while equities are on the rise. Euro area currencies (EUR, SEK, NOK, DKK) have caught a bid following a stronger than expected EU current account, which printed at $25.9B vs. the expected $14.2B in March.

The US dollar has gained 0.6% against the Loonie and is again at a 3-month high ahead of Fed Chairman Bernanke’s speech to Congress this morning (8am MT). Many expect Bernanke to highlight unemployment and low inflation concerns following comments from FOMC member Bullard, who believes ongoing QE is supported by the current low rate of inflation.

The Japanese trade deficit has fallen year-over-year for the 28th consecutive month, leaving the 12-month running average at a record low. The Bank of Japan decided overnight to maintain the current asset purchase program (easing/stimulus), driving the Nikkei 1.6% higher and further weakening the Yen.

Retail sales in the Canadian economy slipped in March, falling 0.2% on expectations of a 0.2% gain. The Loonie remains vulnerable to external factors (Europe and the US); outbound Bank of Canada Governor Carney remarked yesterday that the overall lack of urgency in shifting exports to faster-growing economies (Asia) is concerning.

North American equity futures are up 0.25% this morning, while commodities are mixed. Crude Oil has fallen 0.25% to below $96/bbl while Gold is up 1.15% to $1,393/oz.

The US dollar index is fast approaching a 3-year high on the back of Federal Reserve policy and the speculation that the Fed will end or taper QE. The USD has gained 50 basis points against the CAD overnight.

Bank of America is reporting that China’s trade surplus is 1/10th the official $61 billion reported so far this year as fake transactions disguising money flows are skewing the data. Economists with the Bank believe the Chinese trade surplus to be closer to $6 billion for the year so far.

UK CPI in April missed the mark, printing at 2.4% on expectations of 2.6% and the previous 2.8%. Much like in Canada and the US, falling fuel prices have driven inflation lower.

Equity markets are quiet to begin the morning; North American markets are up 0.15% while European markets are down 0.4%. Commodities are muted: Crude is down 0.15% to $96.55 while Gold has gained 0.2% to $1,385/oz.

Risk aversion is the prevalent theme this morning, with equities and commodities taking a hit. Fundamentals remain soft, while the US FOMC meeting yesterday brought nothing new. Canadian GDP posted a small gain, with the economy rising 0.3% vs. the expected 0.2%.

RIM/BB Shares Get Pounded

Shares in Research in Motion, I mean, BlackBerry, dropped 12% yesterday following the release of the much anticipated BlackBerry 10. Investors don’t view the new smart-phone as the company’s savior and are driving shares down another 12% at the opening bell today.

US weekly jobless claims missed the mark, printing at 368K vs. 362K, well above the previous week’s release of 330K. The United States has been going through a labor force transition, with a shift from full-time to temporary/part-time with no benefits as they navigate the global recession. Now, over 25% of jobs in the US pay below the poverty line ($23,050); this will continue to put a weight on welfare spending and a government that is already running a stunning deficit.

The S&P has issued a warning to markets that China’s growth poses a risk. Chinese growth has been based on stimulus investment primarily focused on infrastructure, generating no long-term job creation and also not helping future generations in terms of education development.

The TSX has opened the morning down 0.3% while the Dow is off only 0.15%. Crude Oil has fallen 0ver 1%, though remains near $97/bbl while Gold is down 0.7%. The Canadian dollar has traded within a fairly tight 40 basis point range in the past 24hrs.

Investors are keenly awaiting today’s Federal Reserve FOMC Statement; no major developments are expected though the tone should remain fairly bearish, which should support the Loonie in terms of diverging monetary policy.

US GDP Misses the Mark

US equities are being dragged lower following a big miss in Q4 GDP, -0.1% vs. the forecast of 1.1%. The economy shrank in the fourth quarter following the biggest drop in defense spending in 40 years; the drop in GDP marks the first since 2009, when the country was still in a recession.

Analysts are crucifying the US Federal Reserve for the miss in Q4 GDP. The US government added $312 billion in debt over the quarter, with $165 billion directly in the form of stimulus, while the economy shrank by $4.9 billion.

A troubling release regarding China came out overnight, indicating that the working age population in China decreased 0.6% in 2012 to 69.2%. With the working age population falling, there will come a time when excess labor moving from the farming sector to manufacturing in urban areas may be absorbed with little or no productivity improvement.

North American equities are down 0.15% overnight, even as commodities remain strong. Crude Oil (WTI) is approaching $98/bbl while Gold has gained over 1% to $1,680/oz. The Canadian dollar is unchanged overnight after gaining over 50 basis points yesterday against the USD.

General sentiment seems to have taken quite a turn overnight, with many headlines painting a not-so-rosy picture. Surprisingly, volatility remains rather low, with equities and commodities making only minor changes overnight.

Canadian Banks Get Downgrade

Many Canadian investors eagerly await tomorrow’s BlackBerry 10 release to see if Research in Motion’s latest product release will be the one that will lead the company forward and drag shares out of the red. Two interesting features of the new smart-phone will be secure separation of work and personal applications as well as secure access to work email and content.

Moody’s Investors Services downgraded the long-term credit rating of Canada’s Big Banks yesterday due to the perceived “exposure to the increasingly indebted Canadian consumer and elevated housing prices.” Canadian banks are still among the most capitalized and highest rated in the world; all Canadian banks shares finished the day up 0.25%-0.8%.

According to the Bloomberg “Misery Index”, which is simply a nation’s unemployment rate + inflation, Spain is now the world’s most “miserable” country. At 30%, this puts Spain worse than the likes of South Africa, Greece, Venezuela, Argentina and Egypt.

North American equities are trading down 0.15% overnight, while commodities are posting a modest gain. Crude Oil has gained 0.3% to $96.75 while Gold is up 0.6% to $1,665/oz. The Canadian dollar has gained nearly 20 basis points against the USD overnight.

The Canadian dollar is entering another weak trading lower against the S dollar. The Loonie has fallen to levels not seen since July 2012, driven lower by a shift in the Bank of Canada outlook and more importantly, the changing dynamic of the Canadian energy industry. Canadian Oil producers are receiving nearly $50/bbl less on their oil compared to the WTI index due to a bottleneck in pipeline capacity.

The Japanese Yen reached a 2 ½ year trading low against the US dollar over the weekend. Bank of Japan officials suggest that the recent fall in the Yen is a correction from recent heights and current policies are targeted at beating deflation.

America’s top trade negotiator said over the weekend that the US is looking for a trade agreement with the EU in an attempt to smooth trade between the two, eliminating tariffs and regulation that hinder trade. Analysts believe a trade agreement would add $50 billion annually to the US economy.

The TSX along with US equities have opened the week 0.2% higher. Crude Oil is up 0.75% to $96.60/bbl while Crude Oil is unchanged at $1,660/oz.

Risk appetite is on the rise this morning, with investors adding risk to portfolios. Commodities and equities are strong, as are the Euro and the US Dollar.

LRTO Partial Payback Boosts Euro

The Euro has surged to the highest level since December 2011 on news that 278 counterparties paid back €137bln from the first long-term refinancing operation (LTRO) from the ECB. Many are viewing this as a turn in the crisis even as economic fundamentals (GDP, employment) remain weak. The Euro has gained 150 basis points against the Loonie over the past 24hrs.

The Canadian dollar has lost another 50 basis points against the USD overnight, bringing the loss for the week up to over 1.5%. Dragging the Loonie down was weaker than expected inflation data this morning. CPI dropped from 0% to -0.6%, well below the expected fall of -0.2% for the month of December. A drop in price of perishable goods led the fall.

Next week will bring a handful of important US news releases. Most important will be the US FOMC interest rate/monetary policy meeting as well as GDP on Wednesday, while the US will report December non-farm employment change on Friday.

North American equity futures have all gained 0.2-0.3%. Crude Oil (WTI) has caught a bid, rising 0.5% to $96.45, though Gold has fallen 0.5% to $1,660/oz.

Markets are unsure what to do this morning following mixed equity earnings and positive US economic data. The US dollar has gained nearly one-cent in the past 24 hours, now trading at the highest level since November against the Loonie.

US House Passes Vote

The US House successfully kicked the can down the road, deciding to deal with the debt ceiling another day. The US government has received an extension on its debt ceiling negotiations until May 19th.

US weekly unemployment claims dropped to the lowest level since January 2008, printing at 335K vs. the expected 355K. The weekly report was not all peaches and cream; however, as 365K Americans saw their unemployment claims expire, dropping out of the labor force. We will likely see the unemployment rate in the US fall in January, not because the economy is gaining jobs, but because more and more Americans are dropping out of the work force.

Shares in Apple are dragging down the NASDAQ after posting weak earnings. Profit grew only 1%, well below the consensus estimates even after sales grew 18%. Apple remains the world’s largest publically traded company; however, shares have fallen 10.5% in pre-market trading, bringing the tech firm within ExxonMobil’s grasp to take the top spot.

TSX and Dow futures are largely unchanged while the NASDAQ is down 1.5% overnight. Crude Oil has regained 1% to $96.22; however, Western Canadian Select (the price that Canadian Oil Producers receive) remains over $40 below WTI. This deep discount will pose a substantial risk to the Canadian economy as domestic producers are bottlenecked by pipeline capacity.

The big news overnight has been the Bank of Japan’s announcement to join the Fed and ECB in unlimited open ended bond purchases from January 2014. The move comes in conjunction with a commitment to target a 2% inflation rate. The Yen has been on a 10-week slide as expectations grew that the BoJ would announce more easing; however, markets were unimpressed with their decision to delay the program until next year. The Yen has gained 1% overnight against most of its major pairs.

CDN Retail Sales Rise

Canadian retail sales in November posted an upside surprise, 0.2% vs. 0.0%; however, excluding the volatile auto-sales component, retail sales fell 0.3% for the month. The Canadian dollar bounced 40 basis points peak to trough overnight, only to settle exactly where things closed yesterday.

In a worrisome development, Germany, France and nine other Euro zone nations got the green-light to implement a financial transactions tax. The levy could be implemented in as little as a few months; no details were available, but some EU officials estimate the tax revenue as high as €35 billion annually. Critics share their concern that such a tax cannot work properly unless it is applied universally or at least across the entire Euro zone.

North American equities are pointing towards an open 0.15% lower, according to equity futures. Gold and Oil have rebounded 0.2% each, to $1,690 and $95.75 respectively, while the Canadian dollar is unchanged overnight, though not without price action.

Markets are mixed today, though central bank meetings this week will be the primary focus (Bank of Japan today, Bank of Canada Wednesday). We should see a quiet day for volumes as the United States celebrates Martin Luther King Day.

Bank of Japan Meets Today

Many investors expect the Bank of Japan to announce an even more stimulus at today’s press conference, potentially adding in an inflation target after increasing their easing program only last month. An economic advisor for the Japanese government has dampened the outlook, stating that the Bank of Japan may need to slow the pace of easing if the effect on inflation and the Yen goes too far.

The Bank of Canada meets on Wednesday and economists are almost unanimous in their expectation that interest rates will remain on hold at 1.00%. However, it is expected that domestic growth will be revised lower, offset by easing fears of global risks, primarily in Europe. The Canadian dollar is unchanged against Friday’s close, though nearly one-cent lower than last Monday’s open against the greenback.

German Chancellor Angela Merkel and her coalition government experienced a surprising loss in a regional election yesterday. Merkel has been commended for limiting the fallout of the EU debt crisis to German taxpayers; however, with German GDP recently posting negative growth, next September’s general election should be a much closer race than what we’ve seen in the past. The Euro has gained 2% against the USD since the New Year.

TSX equity futures are marginally higher, up 0.15%, even as Crude Oil drops 0.35% overnight. Gold remains unchanged at $1,688/oz. In Japan, the Nikkei index has fallen 1.5% on concerns that the current stimulus program will begin winding down.