Pullback in USD continues in European session. This helps oil prices recover from yesterday's losses although fundamentals fail to turn around. Currently trading at 78.5, the front-month contract to WTI crude oil rebounds following a -2.3% decline yesterday. However, the black gold will most likely record the first drop in 3 weeks. Brent crude also edges higher (currently trading at 76.5) from Thursday's close at 76.29.

Euro rises 0.5% to 1.3607 against the dollar although Greece's sovereign crisis remains the headline. We believe the euro rebounds because sellers take a breath after pushing the single currency to oversold territory. Fundamental speaking, the euro should go further to the south as economic recovery in the 16-nation region slows down, evidenced by sliding confidence and declining consumer spending. The situation has been exacerbated by huge budget deficits in Greece and other countries in the south of the region.

In the UK, 4Q09 GDP expanded +0.3% q/q, upwardly revised from +0.1% estimated preliminarily, as driven by growth in the services sector. Industrial production was also revised up to +0.5% while consumer spending increased +0.4%, the strongest gain since 1Q08. Although the better-than-expected readings indicated the US exited from recession at a faster pace than previous anticipated, it didn't help the currency much. The pound, trading at 1.524 against the dollar, remains at the lowest level since May 2009.

While S&P and Moody's potential downgrades of Greece's credit rating has renewed market worries about sovereign default risk, USD also declines as the chance of an early Fed rate hike reduces. These factor help support gold prices in the near-term. The benchmark contract for gold surges for the second day to 1110.5 (intra-day high 1114.5).

Who will be taking IMF's gold has caused volatility in trading the yellow metal. After a report by the official China Daily that China will not buy the IMF supplies, a Russian industry website said the opposite - China has confirmed its decision to acquire 191.3 metric tons of gold auctioned by the IMF. Again, this news is not verified by Chinese officials.

The US government will release its second reading on 4Q09 GDP. The market expects a downward revision to +5.6% q/q, from +5.7%, as net trade's contribution might be lower than previously estimated. The release will impact on USD's movement as a better-than-expected reading may speed up the Fed's tightening policy.