Key News

• Libor Falling Fastest Since January (Bloomberg)
• Financials Drive Gains in Asia (Wall Street Journal)
• Fannie Mae CEO Allison Said to Be Leading Candidate to Run Treasury's TARP (Bloomberg)
• Defaults to Climb to Record 14.7% in Europe on Leveraged Buyouts, S&P Says (Bloomberg)

Key Reports (WSJ):
7:45 a.m. ICSC Chain Store Sales Index For Apr 11: Previous: +0.6%.
8:30 a.m. Mar Producer Price Index: Expected: -0.1%. Previous: +0.1%.
8:30 a.m. Mar Producer Price Index, ex-food & energy: Expected: +0.1%. Previous: +0.2%.
8:30 a.m. Mar Retail Sales: Expected: +0.2%. Previous: -0.1%.
8:30 a.m. Mar Retail Sales, ex-autos: Expected: 0.0%. Previous: +0.7%.
8:55 a.m. Redbook Retail Sales Index For Apr 11: Previous: +0.4%.
10:00 a.m. Feb Business Inventories: Expected: -1.2%. Previous: -1.1%.
4:30 p.m. API Oil Industry Report For April 10
5:00 p.m. ABC/Wash Post Consumer Conf For Apr 11: Previous: -50.

Quotable

"Fortunately, the American consumer is smarter than the quick-fix Washington mindset. Shell-shocked families -- especially some 77 million baby boomers for whom retirement planning is an urgent imperative -- know they have no choice other than to save. The personal saving rate has risen from 0.8 percent to 4.2 percent in the past six months alone, and is on its way to a new post-bubble equilibrium that I would place in the 7.5 percent to 10 percent zone."

                              Stephen Roach

FX Trading - Partying While We Can on the Dollar's Dime
Feel free to start dusting off those champagne bottles now - it's sounding like we're going to have something to celebrate this coming New Year's Eve.

Recovery expectations had been pushed back from original forecasts aimed at the second half of 2009. Not until 2010, we'd been told, should we expect growth to turn the corner.

But the optimism is really flowing right now. 

Indeed, some reports are pinpointing an official recovery date by as early as September 2009. There's been a streak of randomly positive economic data out of the United States in the last month supporting that view. Plus, the early Q1 earnings season has been short on disappointment and, according to a Bloomberg.com article, the "U.S. government and the Fed spent, lent or committed $12.8 trillion" so far to restore prosperity.

Confidence has been given a swift kick in the butt.

Yesterday was a solid day for the pack of major currencies - they all, including the yen, made gains against the US dollar. This morning it's been mostly a pullback ahead of stocks opening up in the US. The early-going for stocks should set the tone; risk appetite will again be the focus as a smoothly positive day for stocks yesterday soured in the final minutes of trading as the major indices gave back decent ground.

In about the last month the greenback has drifted higher from its corrective low point. A short uptrend is the nearest support in the face of reenergized market confidence

Narrowing in on our risk-taking currency of choice, the Australian dollar is trading at what looks to be a hugely critical level. It's testing resistance going back to early January.

The move higher since mid-March has been quick and far-reaching. The resistance level now in play plus a change in the risk-appetite - sparked perhaps by disappointing earnings, worse-than-expected economic data or an overdone rally - could combine to cap AUDUSD at these levels.

But be careful not to underestimate the power of the currencies - if the risk-environment doesn't change for the next couple days then this pair could easily shoot through these levels and work towards the 8000-area in no time.