Daily Forex Analysis by Finexo.com 09/03/2010

Past Events:

• EUR German Industrial Production m/m out at 0.6% versus expected 1.1%, prior 1.0%
• GBP BRC Retail Sales Monitor y/y out at 2.2% versus expected -0.7%
• GBP RICS House Price Balance out at 17%, versus predicted 34%, prior 31%
• CAD Housing Starts out at 197K, versus expected 188K, prior 185K
• AUD ANZ Job Advertisements m/m 19.1%, versus prior -8.1%
• AUD NAB Business Confidence out at 19 versus prior 15
• CHF CPI m/m

Upcoming Events:

• GBP Trade Balance (930GMT)
• AUD Westpac Consumer Sentiment (1130GMT)
• JPY Core Machinery Orders m/m (1150GMT)
• AUD Home Loans (tomorrow 0030GMT)

Market Commentary

After closing down against the USD, for the 6th time out the past seven weeks, the Euro appreciated against 11 of its 16 major currency counterparts following French comments that helped aid risk appetite. Following the meeting between the French President Nicolas Sarkozy and Greek Prime Minister George Papandreou, the French President reportedly vowed to help Greece if needed and pledged to crackdown on market speculators targeting the country. The EUR/USD, however, has been having rather mixed reactions and continues to remain within its consolidation phase as the highly traded pair has been unable to rise toward last Wednesday’s highs of 1.3735.

After meeting with both the German Chancellor and the French President, the Greek Prime Minister will travel today to Washington D.C to meet with President Barak Obama.

Yesterday morning, Germany announced that its industrial productions rose in January as energy output surged throughout the unseasonably cold winter, helping to offset a collapse in the construction activity. Germany’s recovery from the recession froze at the end of 2009 and the coldest winter in the past 14 years is not helping to heat up the country’s economic recovery. While Industrial Production came out below market expectations of 1.1%, the 0.6% rise between December and January indicates that Germany could be resuming its path towards economic recovery. The euro was little changed after the report and traded at $1.3654.

The Japanese Yen rose against the Euro, snapping a two-day drop, on speculation that Japanese companies are bringing home overseas earnings before the nation’s fiscal year ends this month. The Yen appreciated against all of its 16 major currency counterparts following China’s foreign-exchange regulator statement that speculative capital is flowing into the country, fueling optimism the funds will also boost neighboring economies. The Yen rose to 122.58 per Euro early this morning (6:38 GMT), from 123.13 per Euro in New York yesterday when it dropped to 123.90 per Euro, the weakest level since Feb. 23. Japan’s currency gained against the US Dollar, jumping from yesterday’s 89.99 to 90.31 this morning.

The British Pound fell for a second day against the U.S Dollar after a U.K. house price gauge was weaker than the market had forecasted, a sign the country’s recovery may be running out of steam. The Sterling slid against 15 of its 16 major currency partners, following the Royal Institute of Chartered Surveyors (RICS) report that housing prices within the U.K rose by 17%, falling far below market expectations of a 30% increase. After tumbling 0.64% against the USD yesterday, to close at $1.50530, the Pound continued to slide. Following the release of the worse than expected RICS House Price Balance, the GBP touched $1.49745, down 0.52% from yesterday’s closing.

According to the BRC Retail Sales Monitor, UK retail sales saw a renewed strong growth in February following January’s unexpected weak outturn, due primarily to the unseasonably cold weather and the hike in Value Added Tax. Like-for-like sales rose 2.2% on the year and total sales were up 4.5% from February 2009. Over the three-month period of Dec-Feb like-for-like sales were 2.1% up on a year ago and total sales were 4.1% higher. The BRC said that sales had been boosted by the poor performance of retailers in February 2009, when like-for-like sales had dropped 1.8%, hit by snow and consumer caution.

Canadian housing starts rose more than expected for a second straight month as multiple-dwelling projects soared, Canada Mortgage and Housing Corp. reported yesterday. Housing Starts increased by 6.1% in February, strengthening views that the residential sector is a key leader pulling the economy out of recession. New home construction rose to a seasonally adjusted annualized rate of 196,700 units from a revised 185,400 units in January. Following this stronger than expected data, as the USD/CAD stuck a six-week high against its American counterpart of 1.0257. The Loonie closed at $1.02790, appreciating a total of 0.127% from the day’s open.

Across the Pacific, Australian business confidence increased in February for the second month in a row, adding to signs the economy is strong enough to sustain higher interest rates.Shortly after midnight, the National Australia Bank Ltd. (NAB) reported that both business confidence and conditions continued to strengthen in February to hit a four month high. The NAB business confidence index gained 4 points to plus-19 points in February, matching last November’s seven year high. Business sentiment in Australia is strengthening amid a rapid increase in Asian demand for Australian natural resources namely iron ore, increasing the chances that the RBA will likely raise the benchmark interest rate next month for the fifth time in six meetings. Australian advertisements for job vacancies jumped in February by the most in more than a decade as increasing Asian demand for raw materials stokes demand for skilled workers. Early this morning, the Australia & New Zealand Banking Group Ltd. (ANZ), reported that jobs advertised in newspapers and on the Internet climbed 19.1% from January, when they fell 8.1%. The increase was the biggest monthly gain since the index began including ads on the Web in 1999.

Yesterday the AUD/USD moved above the 0.90 range. Following the release of this positive economic data, the pair jumped to 0.91075, up 0.23% from the day’s open.

Later this morning (1130GMT), Australia will release the Westpac Consumer Sentiment- Survey of about 1,200 consumers which asks respondents to rate the relative level of past and future economic conditions, employment, and climate for major purchases. This indicator isn’t stable – it fell by 2.6% after rising by 5.6% beforehand. A slower rise is predicted this time.

Written by Finexo.com