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Daily Market Commentary

Discussion in 'Forex Daily News & Outlook' started by gcitrading, Mar 1, 2010.

  1. gcitrading

    gcitrading Contributing Member

    Dec 16, 2008
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    The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3460 level and was capped around the $1.3655 level. The common currency was pushed lower after a European Union official was quoted as saying Greece must meet its 2010 fiscal deficit target to regain credibility with the capital markets. Greek Prime Minister Papandreou is scheduled to meet German Chancellor Merkel in Berlin this week and there is speculation a deal may be reached in which a multilateral financial aid package is reached. There is speculation that multiple eurozone members may purchase part of Greece’s upcoming debt offerings to help the country reduce its budget deficit by at least 3%. Data released in the eurozone today saw EMU-16 February manufacturing PMI improve to 54.2 from 52.4, a 30-month high, while German manufacturing PMI raced higher to 57.2 from 53.7. Also, the German January import price index improved 1.7% m/m and 1.4% y/y. In U.S. news, data released today saw February ISM manufacturing decline to 56.5 from 58.4 in January while January construction spending was off 0.6%. The ISM prices paid sub-index fell back to 67.0 from the prior reading of 70.0. Also, January personal income was up a weaker-than-expected 0.1%, down from a revised 0.3% in December, while January personal spending printed at +0.5%, up from a revised +0.3% in December. Additionally, the January PCE deflator expanded 2.1% y/y while core PCE was up +0.0%, down from the prior reading of +0.1%. U.S. Federal Reserve Vice Chairman Kohn announced he will step down in June after 40 years at the central bank. His retirement paves the way for the Obama administration to appoint a Democrat at a time when it is trying to significantly reduce the Fed’s independence. Euro bids are cited around the US$ 1.3335 level.

    The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.80 level and was capped around the ¥89.45 level. Financial services minister Kamei called on Bank of Japan to do more to help improve the economy, saying the “central bank should consider underwriting debt to help the government create funds for fiscal stimulus. It’s necessary to provide funds for bold fiscal spending. Without fiscal stimulus funds, minister Kan can’t resolve the economy’s output gap. He’s not a magician.” BoJ Governor Shirakawa and other Policy Board members have vehemently rejected additional calls for the central bank to monetize additional debt. Finance minister Kan today said he wants Japan to be out of deflation by the end of 2010 even though BoJ said it expects there will be price declines for three additional years. BoJ Governor Shirakawa, in turn, today reiterated the government needs to exercise more fiscal discipline. The Nikkei 225 stock index climbed 0.45% to close at ¥10,172.06. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥120.05 level and was capped around the ¥121.90 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥132.00 figure while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.05 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8263 in the over-the-counter market, up from CNY 6.8260. Data released in China today saw February manufacturing PMI decline go 52.0 from 55.8, considerably weaker-than-expected. Revised U.S. TICS data released on Friday confirmed China is the largest holder of U.S. Treasuries. Foreign holdings of U.S. debt now totals US$ 2.7 trillion in aggregate.

    The British pound weakened sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4780 level and was capped around the $1.5200 figure. Cable moved lower as traders reacted to strong-than-expected U.K. GDP data that were released on Friday. One theory suggests Prime Minister Brown may take advantage of the stronger-than-expected GDP data by calling a general election earlier than previously expected. Sterling is lower on the premise that the U.K. could have its first minority government in decades. The opposition Tory power is largely expected to assume more after more than one decade of Labour rule. Data released in the U.K. today saw January net lending to individuals increase to a total of ₤2.0 billion in January from ₤1.5 billion in December. Also, February manufacturing PMI was unchanged at 56.6 and January mortgage approvals came in at 48,000, down from 58,000 in December. Cable bids are cited around the US$ 1.4455 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9145 level and was supported around the ₤0.8965 level.

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