FX Weathers the Storm, Aussie Below par

The ECB resumed bond buys and US economic data continue to improve as forex traded at a stalemate on Thursday even as risk assets generally deteriorated. There are no data points scheduled for release in the Asia-Pacific region. Oil seems be finally breaking that 6-week trend line. Stay tuned for the next update in the Intermarket insights.

EUR/USD came into US trading with some momentum, climbing 100 pips from the earlier lows and touching 1.3540. The push higher came after US initial jobless claims fell to 388K from the 397K expected. A round of short-covering was also sparked by rumours of heavy ECB buying in Italian and Spanish bonds.

Sentiment began to falter after the Philly Fed missed estimates on a reading of 3.6 compared to 8.7 in October but the larger slide came after a euro zone official told Reuters there are no plans for an EFSF bailout of Italy. German also shot down a rumour that the ECB would lend to the IMF, who would then lend to PIIGS countries.

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EUR/USD fell as low as 1.3448 but held above Wednesdays low of 1.3420 in a sign that the sellers may be taking a short break.

The Australian dollar was a laggard as it fell below 1.00 for the first time since mid-October. The declines came amidst a broad commodity selloff. Copper fell 3%, oil nearly 4% and gold fell $54 to $1720.

In comparison, the changes in FX were relatively small but this is likely a case of the periodic lags in some risk assets. The S&P 500 fell 1.7% to 1216, a one month low.