The U.S. dollar was consolidating its recent losses Wednesday in largely uneventful activity. Sterling was the main exception. Boosted by the firmer-than-expected CPI report Tuesday and Wednesday's favorable jobs report, sterling has pushed to new 10-week highs against the dollar at $1.5280.

The news stream and technical factors warn that the dollar's down leg is not over. Pullbacks in the euro below $1.2700 have been shallow as it has chopped around in less than a half-cent range thus far Wednesday. A move above $1.2750 may be seen as a breakout and induce new buying for a move to $1.30-$1.31. For the second time this week, the dollar found the air thin above 89 yen, despite continued risk-on type of activity in general.

Asian equities responded positive to Intel's ( INTC) strong report. The MSCI Asia-Pacific Index rose 1.3%, led by a 2% rally in technology. Strong Singapore gross domestic product figures (26% annualized in the second quarter) boosted the Straits Times by 0.8%, but Singapore is seen as a bellwether and this helped general sentiment. Thailand's 25 basis points rate hike may be behind the relative underperformance of the Thai market. Its 0.4% gain was among the smallest in the region, excluding India's outright decline.

European bourses were struggling to extend their seven-day advancing streak. While technology and health care were generally firmer, oil and gas, financials and utilities were more than offsetting. U.S. shares were trading higher and the earnings focus is on financials.

Japanese government bonds and benchmark 10-year bonds in Europe were under modest pressure Wednesday. Yields were up 1-2 basis points and there is some widening of Italy, Spain and Portugal premium over Germany. Germany, Italy and Portugal were bringing new supply to market Wednesday. The German five-year auction went well (bid to cover 1.8 vs 1.1 last time with a 13 basis points increase in yield). The Italian auction results were a bit softer, but still passable. The Portuguese sale was arguably the weakest with the largest rise in yields, but given the two notch downgrade Tuesday it is a success. U.S. Treasuries were generally firm. Wednesday is the final leg of this week's Treasury sales -- $13 billion of 30-year bonds.

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