Forex Market Commentary and Analysis (25 March 2010)
The euro appreciated vis-Ă -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3370
level and was supported around the $1.3285 level. The common currency clawed back some of
yesterdayâ€™s sizable losses with late Australasian activity lifting the pair
from intraday lows.Peopleâ€™s Bank of
China Vice Governor Zhu warned â€śI don't
think Greece will go bankrupt because it's still relatively small, but we don't
see decisive action that tells the market, 'We can solve it, we can close it.â€ťZhu added Spain and Italy are the â€śmain
concern today.â€ťEuropean Union officials
are convening today at a summit to try and shore up support for financial
assistance for Greece.Data released in
the eurozone today saw the German GfK consumer confidence survey remain flat at
3.2 for April while the EMU-16 M3 money supply was off 0.4%,
Merkel reported she will recommend a combination of International Monetary Fund
assistance and bilateral aid â€śas a last resortâ€ť for Greece.European Central Bank member Wellink said
Portugal needs to do â€śadditional thingsâ€ť to be credible while Ecofin Chairman
Juncker said the markets will come to see Greeceâ€™s budget plans as â€ścredible.â€ť
Bank of England Monetary Policy Committee member Posen said the inflation rate
in the eurozone will â€śkeep going down.â€ťECB
President Trichet reported the central bank will maintain its emergency
collateral rules â€śbeyond the end of 2010.â€ťTrichet reported Greeceâ€™s efforts to restore fiscal soundness are â€śconvincingâ€ť
and â€ścourageous.â€ťThe ECBâ€™s move to
maintain an easy and flexible collateral eligibility into 2011 give the central
bank room to accept the debt of fiscally-troubled eurozone states as collateral.ECBâ€™s Nowotny reported the euro will remain
an important international currency.In U.S. news, data released today saw
weekly initial jobless claims decline to 442,000 from a revised 456,000 while
continuing jobless claims fell to 4.648 million from a revised 4.702
million.Data to be released in the U.S.
tomorrow include Q4 GDP and final March University of Michigan consumer
sentiment.Fed Chairman Bernanke testified
today and said the â€śeconomy continues to require the support of accommodative
monetary policiesâ€¦However, we have been working to ensure that we have the
tools to reverse, at the appropriate time, the currently very high degree of
monetary stimulusâ€¦As the expansion matures, the Federal Reserve will need to
begin to tighten monetary conditions to prevent the development of inflationary
pressures. We have full confidence that, when the time comes, we will be ready
to do so.â€ťThe Fed will end one of its
emergency mortgaged-backed securities purchase programs at the end of this
month and Bernanke said the Fed does not anticipate the Fed to sell the US$
1.43 trillion in housing debt it picked up â€śin the near term,â€ť noting the Fed
will likely wait â€śat least until after policy tightening has gotten under way
and the economy is clearly in a sustainable recovery.â€ťThe initial jobless claims data may be
pointing to an improving labour sector and many economists expect the March non-farm
payrolls report will evidence decent jobs growth for the first time in several
months.Euro bids are cited around the US$ 1.3335 level.
The yen appreciated vis-Ă -vis the U.S. dollar today as the
greenback tested bids around the ÂĄ91.75 level and was capped around the ÂĄ92.35
level. Bank of Japan Policy Board member
Kamezaki dovishly reported â€śThe central bank will implement policy proactively if
necessary, and last weekâ€™s monetary easing was based on such a stance,â€ť adding
the BoJ will maintain an â€śextremely accommodativeâ€ť policy.Many dealers believe the government will
continue to pressure the central bank into easing policy further to counter
significant deflationary pressures.Such
moves are basically intended to boost consumer and investor sentiment and do
not have an appreciable impact on the provision of liquidity.Data released in Japan overnight saw the
February corporate service price index decline 1.3% y/y.The Nikkei 225 stock index climbed 0.13% to
close at ÂĄ10,828.85.U.S. dollar offers
are cited around the ÂĄ94.75 level.The euro moved higher vis-Ă -vis the yen
as the single currency tested offers around the ÂĄ123.20 level and was supported
around the ÂĄ122.25 level.The British pound moved higher vis-Ă -vis
the yen as sterling tested offers around the ÂĄ138.00 figure while the Swiss franc moved higher vis-Ă -vis
the yen and tested offers around the ÂĄ86.25 level. In Chinese news, the U.S. dollar appreciated vis-Ă -vis the Chinese yuan
as the greenback closed at CNY 6.8271 in the over-the-counter market, up from
CNY 6.8267. Peopleâ€™s Bank of China
Deputy Governor Zhu Min reported interest rates are a â€śheavy-duty weapon,â€ť
adding there are other tools the central bank can use to â€śmanage liquidity.â€ťZhu also added China will wait to confirm
economic growth is steady before raising rates.Additionally, Zhu reported the yuanâ€™s real exchange rate â€śhas actually
British pound appreciated vis-Ă -vis the U.S. dollar today as cable tested offers
around the US$ 1.5005 level and was supported around the $1.4855 level. Cable briefly popped above the
psychologically-important US$ 1.50 figure during European dealing but traders
pushed the pair back below the $1.49 figure during the North American
session.Data released in the U.K. today
saw February retail sales record their largest jump since May 2008, up 2.1% m/m
and 3.5% y/y.Chancellor of the
Exchequer Darling reported his latest economic growth forecast is â€śin line with
the Bank of England forecast.â€ťDarling
yesterday reported he plans to â€średuce borrowing further.â€ťDarling yesterday reduced his budget deficit
forecast for the next five fiscal years by ÂŁ44 billion.On the whole, Darlingâ€™s fiscal report was
more proactive than expected about addressing the U.K.â€™s fiscal problems.The U.K.â€™s 2009-2010 budget deficit is
expected to total around ÂŁ167 billion and be slightly less in the 2010-2011
fiscal year.Cable bids are cited around
the US$ 1.4455 level.The euro moved lower vis-Ă -vis the
British pound as the single currency tested bids around the ÂŁ0.8895 level and
was capped around the ÂŁ0.8955 level.
franc appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0675 level and was capped around the CHF 1.0740 level. The KOF Instituteâ€™s March economic forecast
will be released tomorrow.Swiss
President Leuthard said the franc is â€śat a quite crucial levelâ€ť and said it is
up to the Swiss National Bank to decide whether to intervene.Swiss National Bank Vice Chairman Jordan
reiterated yesterday the central bank will work to prevent excessive franc
appreciation.Swiss National Bank
President Hildebrand yesterday reported the central bank will â€śdecisivelyâ€ť act
against â€śexcessiveâ€ť franc strength, noting the central bank can intervene to a
â€śvery large extent.â€ťSwiss National Bank
on Monday published its quarterly economic report today and noted it will
continue to â€śact decisivelyâ€ť to prevent an â€śexcessiveâ€ť appreciation of the
franc.U.S. dollar offers are cited
around the CHF 1.1180 level. The euro
came off vis-Ă -vis the Swiss franc as the single currency tested bids
around the CHF 1.4250 level while the
British pound moved higher vis-Ă -vis the Swiss franc and tested offers
around the CHF 1.6040 level.
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