Bright Spots in The South Pacific

Risk trades bounced but only modestly after the rout on Monday. The Australian dollar caught an extra boost from the RBA and was the best performer while the yen lagged. The New Zealand dollar was able to keep pace with its Aussie rival after a late boost from jobs numbers.  

The New Zealand jobs report was in-line with estimates as the unemployment rate remained at 6.0% but that didn't tell the whole story. The participation rate surprisingly rose 0.3 percentage points; no change would have knocked unemployment to 5.7%.

Even before the data, the ability of the kiwi to rally so much on a small bounce in risk sentiment was  a positive sign.

Otherwise markets were subdued ahead of the ADP and ISM reports due on Wednesday followed by the ECB and NFP. The yen crosses pared a portion of Monday's losses but generally not enough to make traders rethink positions.

US Dec factory orders fell 1.5% which was slightly better than expected but near-target after negative revisions. Comments from Evans and Lacker emphasized the high bar for any changes to the Fed's $10 billion pace of tapering.

The theme in 2014 so far has been data-driven momentum. Good headlines like we saw from the RBA have led to lasting gains while negative news like the ISM manufacturing data has led to extended declines. That emphasizes keeping and eye on the news and riding the momentum.

China remains closed for a third day for holidays and the Asia-Pacific calendar is light.