Forex Market Commentary and Analysis (31 March 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3540
level and was supported around the $1.3385 level. The common currency tested a key short-term
retracement level today, representing 50% of the March range.The pair gained ground even though there are
significant doubts concerning the viability of Greece‚Äôs plans to improve its
massive fiscal deficits.The Greek
government today indicated its May debt servicing needs will be around ‚ā¨11.6
billion.Greece‚Äôs new bond issue this
week was not entirely well-received by investors and dealers are concerned that
a significant amount of more supply of sovereign eurozone debt with
deteriorating credit quality could imperil the euro further. The yield on Greek ten-year debt has increased
about 25bps since European leaders agreed to a financial aid package for Greece
on 25 March and this evidences the market‚Äôs discomfort with the country‚Äôs
severe problems. Data released in the eurozone today saw the EMU-16 February
unemployment rate tick higher to 10.0% from 9.9%, as expected, while the March
flash consumer price inflation estimate was up 1.5% y/y ‚Äď its highest level in
ten months.Germany posted its largest
decline in jobless claims since August 2008 and the March unemployment rate
fell to 8.0%.German February retail
sales will be released tomorrow. French data released today saw February
producer prices climb 0.1% m/m and 1.0% y/y.Despite today‚Äôs increase in headline eurozone inflation, the rate is
still below the European Central Bank‚Äôs perceived comfort zone of 2.0% and
given the backdrop of the sovereign credit crunch, a move higher in official
interest rates is very unlikely for quite some time. ECB President Trichet said it is ‚Äúextremely
important to anchor inflation expectations.‚ÄĚ In U.S. news, data released today saw MBA mortgage applications
climb 4.3% in the latest week while February factory orders fell to +0.6% from
a revised +2.5% in January.Also, March
Chicago PMI fell back to 58.8 from the prior reading of 62.6.The most important data released today saw
March ADP employment off 23,000, a slight improvement from the revised prior
reading of -24,000.These data represent
private sector job losses and some economists may scale back their forecasts
for Friday‚Äôs non-farm payrolls report with many forecasts currently focusing on
job gains around 185,000.Atlanta Fed
President Lockhart said he is watching for ‚Äúdurable‚ÄĚ job gains while Dallas Fed
President Fisher said the U.S. cannot ignore the impact of its massive deficit
of yields.Fed Governor Duke reported
U.S. banks remain weak and noted the decrease in bank lending is very
troubling.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 ¬•93.60 level and was supported around the ¬•92.75
level. Traders await the release of the
all-important Bank of Japan Tankan survey of corporate sentiment tonight with
most forecasts focusing on an improvement in the main large manufacturers‚Äô
confidence index to -14 from the prior reading of -24.Other components include the large
manufacturing outlook, large non-manufacturing outlook, and capex numbers with
large all-industry capex expected to improve to -0.4% in Q1 from -13.8% in
Q4.Even though the Tankan is expected
to evidence improvement across the board, the survey does little to address the
weak final private demand in the country and the deflationary problems evident
in the economy.Data released in Japan
overnight saw March small business confidence improve to 45.8 from the prior reading
of 42.3while February housing starts were off 9.3% y/y to an annualized
construction orders were off 20.3% y/y and February total cash earnings data were
off 0.6% y/y.Today is the final day of
Japan‚Äôs fiscal year-end and most dealers believe the yen will continue to
depreciate early in the new fiscal year.The government will boost Japanese government bond issuance to a record ¬•144.3
trillion in the fiscal year beginning tomorrow.The Nikkei 225 stock index lost 0.06% to close at ¬•11,089.94. 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 ¬•126.45 level and was supported around the ¬•124.40 level.The
British pound moved higher vis-√†-vis the yen as sterling tested offers
around the ¬•141.80 level while the Swiss
franc moved higher vis-√†-vis the yen and tested offers around the ¬•88.80 level.
In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8259 in the
over-the-counter market, up from CNY 6.8257. It was reported that Chinese banks purchased
US$ 978 billion in foreign currency for their clients in 2009, selling yuan in
the process.People‚Äôs Bank of China
reported the economic recovery has been ‚Äúfurther cemented‚ÄĚ and added the
management of liquidity following the record credit expansion has become ‚Äúarduous.‚ÄĚPBoC called on China to urgently adjust its
economic model and said it must utilize multiple monetary tools ‚Äúflexibly.‚ÄĚSome traders believe China may widen the yuan‚Äôs
trading band in the second quarter.
British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers
around the US$ 1.5185 level and was supported around the $1.5040 level. Data released in the U.K. today saw GfK March
consumer confidence tick lower to -15 from -14 in February.March PMI manufacturing data will be released
tomorrow and liquidity will be light early next week on account of the U.K.
Easter Monday market holiday.Cable bids
are cited around the US$ 1.4455 level.The euro moved higher vis-√†-vis the
British pound as the single currency tested offers around the ¬£0.8945 level and
was supported around the ¬£0.8870 level.
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.0520 level and was capped around the CHF 1.0685 level. SNB Board member Danthine said the central
bank will prevent ‚Äúany excessive appreciation of the Swiss franc‚ÄĚ and added it
has ‚Äúthe means to achieve that objective, without dispute.‚ÄĚData released in Switzerland today saw the
March KOF indicator rise to 1.93 from an upwardly-revised 1.70 in
February.Swiss National Bank Vice
Chairman Jordan reiterated last week that the central bank will work to prevent
excessive franc appreciation.Swiss
National Bank President Hildebrand last week reported the central bank will
‚Äúdecisively‚ÄĚ act against ‚Äúexcessive‚ÄĚ franc strength, noting the central bank
can intervene to a ‚Äúvery large extent.‚ÄĚU.S.
dollar offers are cited around the CHF 1.1180 level. The euro moved lower vis-√†-vis the Swiss franc as the single
currency tested bids around the CHF 1.4240 level while the British pound moved lower vis-√†-vis the Swiss franc and tested bids
around the CHF 1.5925 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
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15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
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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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