Forex Market Commentary and Analysis (23 March 2010)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3475
level and was capped around the $1.3570 level. The common currency came off on
renewed fears regarding Greece‚Äôs fiscal crisis amid worries there may be
insufficient political agreement to implement a financial aid package for the
country.A German finance ministry
official reported Germany and France agree on supporting an International
Monetary Fund rescue package of Greece, a contrast with other reports that
officials are far from an agreement about financial assistance.Greece needs to sell about ‚ā¨10 billion in new
bonds in coming weeks to refinance maturing debt.Germany is also said to favour a proposal
that would stiffen the penalties for European Union members that do not maintain
fiscal discipline.Data to be released
in the eurozone tomorrow include March PMI and January industrial new
orders.EMU-16 leaders will convene this
week to discuss the Greeek situation and the common currency could get a boost
if a comprehensive solution is announced for Greece.Incoming ECB Vice President Constancio said a
package for Greece will be a ‚Äúnormal‚ÄĚ loan and not a bailout.In
U.S. news, Chicago Fed Evans last night indicated he would not be surprised
if the Fed‚Äôs accommodative monetary policy remained in place through 2011,
clearly putting him in the ‚Äúdovish‚ÄĚ camp.Atlanta Fed President Lockhart noted the U.S. has a ‚Äúprivileged‚ÄĚ
position because the dollar is the global reserve currency but warned the U.S.
should not assume that will remain permanent.Many data were released in the U.S. today.February existing home sales were off 0.6%
m/m to 5.02 million annualized units, a significant improvement from the prior
print of -7.2%.The house price index
also improved to -0.6% m/m from the revised tally of -2.0% m/m.Additionally, the March Richmond Fed
manufacturing index improved to +6 from the prior reading of +2.Durable goods and new home sales data will be
released tomorrow.Philadelphia Fed
President Plosser called on the Fed to adopt a less discretionary rate-setting
framework.Euro bids are cited
around the US$ 1.3335 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•90.45 level and was supported around the ¬•90.05
level. Japanese financial markets
reopened overnight and the yen was mixed across the board.Minutes from Bank of Japan Policy Board‚Äôs
were released overnight and they indicated ‚ÄúSome members were of the view that
upside and downside risks were becoming balanced‚ÄĚ whereas others observed ‚Äúconsiderable
downside risks to the economy.‚ÄĚ Bank of Japan last week expanded monetary
policy further, doubling a three-month lending facility to ¬•20 trillion amid
strong political pressure to ease policy further.The move is expected to have a limited impact
on liquidity and was probably implemented to try and improve market sentiment. Policymakers in February also expressed
concern with escalating deflationary pressures and the perception that China
may be experiencing an asset bubble.Data
released in Japan overnight saw Q4 financial household assets climb 2.5%
y/y.Deflationary pressures are expected
to remain strong through at least 2011.Dealers
continue to cite repatriation flows back into Japan ahead of the fiscal year
end next week.The Nikkei 225 stock
index lost 0.47% to close at ¬•10,774.15. U.S. dollar offers are cited around
the ¬•94.75 level.The euro moved higher vis-√†-vis the yen as the single currency
tested offers around the ¬•122.60 level and was supported around the ¬•121.75
level.The British pound moved lower vis-√†-vis the yen as sterling tested bids
around the ¬•135.20 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•85.45 level.
In Chinese news, the U.S. dollar depreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the over-the-counter
market, down from CNY 6.8267. People‚Äôs
Bank of China Governor Zhou reported the U.S. and China may have hold bilateral
talks to discuss exchange rates, adding political ‚Äúvery high profile noise‚ÄĚ isn‚Äôt
‚Äúhelpful.‚ÄĚZhou added ‚ÄúFor China, we
also have a tremendous task to create more jobs.‚ÄĚTraders are starting to focus on a U.S.
government report due 15 April that could potentially identify China as a
industrial profits data will be released this week.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4970 level and was capped around the $1.5110 level. Bank of England announced new plans today
involving long-term repo transactions designed to increase the provision of
liquidity through accepting a wider range of collateral.Data released in the U.K. today saw the March
CBI distributive trades survey decline to +13 from +23.Also, BBA mortgage approvals came in
stronger-than-expected at 35,200 while February core consumer price index
increased 2.9% y/y, down from January‚Äôs print of +3.1% y/y.At the headline level, CPI was up 0.4% m/m
and 3.0% y/y.Cable bids are cited
around the US$ 1.4455 level.The euro moved higher vis-√†-vis the
British pound as the single currency tested offers around the ¬£0.9015 level and
was supported around the ¬£0.8965 level.
franc weakened vis-√†-vis the U.S. dollar today as the greenback tested
offers around the CHF 1.0635 level and was supported around the CHF 1.0575 level.
Swiss National Bank President Hildebrand
reported the central bank will ‚Äúdecisively‚ÄĚ act against ‚Äúexcessive‚ÄĚ franc
strength, noting the central bank can intervene to a ‚Äúvery large extent.‚ÄĚSwiss National Bank yesterday published its
quarterly economic report today and noted it will continue to ‚Äúact decisively‚ÄĚ
to prevent an ‚Äúexcessive‚ÄĚ appreciation of the franc.In recent days, many dealers speculated the
SNB would be less likely to sell francs for euro given the recent improvement
in the U.S. economy and the cross has fallen to fresh multi-month lows as a
result. SNB today indicated it expects the Swiss recovery to be ‚Äúmoderate and
fragile.‚ÄĚ Data released in Switzerland last
week saw Q4 industrial production rise 6.4% q/q and decline 1.1% y/y while the
February trade surplus declined to CHF 1.29 billion from CHF 2.42 billion.The
euro came off vis-√†-vis the Swiss franc as the single currency tested bids
around the CHF 1.4325 level while the
British pound moved higher vis-√†-vis the Swiss franc and tested offers
around the CHF 1.5950 level.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
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POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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