Daily Forex Analysis by Finexo.com 11/03/2010

Past Events:

• USD Federal Budget Balance out at -220.9B versus expected -207.5B, prior -42.6B
• USD Crude Oil Inventories out at 1.4M, versus expected 1.9M, prior 4.1M
• GBP Manufacturing Production m/m out at -0.9%, versus expected 0.3%, prior 0.9%
• AUD Employment Change 0.4K versus expected 15.2K, prior 56.5K (revised)
• AUD Unemployment Change out at 5.3% versus expected 5.3%, prior 5.2% (revised)
• JOY Final GDP q/q out at 0.9%, versus expected 1.0%, prior 1.1%.

Upcoming Events:

• GBP Consumer Inflation Expectations (930GMT)
• CHF Libor Rate (1300GMT)
• CAD Trade Balance (1330GMT)
• USD Trade Balance (1330GMT)
• USD Unemployment Claims (1330GMT)

Market Commentary:

The Euro surged to a 2-day high against the U.S. dollar yesterday, as a wave of risk demand swept the markets in the wake of upbeat economic data from both the United States and China. After suffering losses against several of its major counterpart yesterday, the USD continued to fall as the dollar index traded at 80.441 this morning, down from 80.484 late last night.

Later today (1330GMT) the U.S Department of Labor will release its first Unemployment Claims report after the release of the Non-Farm Payrolls. The market predicts that the, jobless claims will show a slight improvement – a drop from 469K to 452K, pushing the U.S dollar higher.

Also out today (1330GMT), the US and Canada will simultaneously release their trade balances. This double-feature release always triggers action in USD/CAD. For a third month the U.S trade deficit is predicted to widen slightly from 40.2B to 40.9B, as imports are expected to have grown faster than exports. North of the boarder, the market forecasts that Canada’s trade deficit will cross into a surplus of 0.3B.

Yesterday, the USD/CAD touched on a 5 month low, as the Canadian dollar continued to rise for the ninth straight day against its neighboring U.S. currency – the longest streak since 2004. The Loonie continued to trade at its strongest level in almost two months as crude oil, the nation’s largest export, neared $82 a barrel. Tomorrow, Statistics Canada will release the nation’s unemployment change. Last month, the unemployment dropped to 8.3%, following a rapid surge in jobs of 43,000. The market expects that the number of employed people will increase by 17.5K in February, holding the unemployment rate steady at 8.3%.

Across the Atlantic, the Pound fell for a third day against the Euro and the U.S Dollar as U.K factory production unexpectedly dropped in January for the first time in five months, signaling that manufacturing sector is struggling to shake off the nation’s longest recession in history. The office of National Statistics announced yesterday that manufacturing production fell 0.9% between December and January, against market expectations of a 0.3% increase. Following the release of the report, the Pound tumbled against 15 of its 16 major currency counterparts. The GBP fell 0.4% against the U.S dollar to touch on $1.4934, and slide 0.5% down against the Euro to hit a near three month high. This disappointing drop in factory production adds to economists’ speculation that U.K. gross domestic product will be weak or may even be negative for the first quarter of this year. The GBP/USD closed at 1.49819, down 0.114% from its opening price.

Japan’s economy expanded less than initially estimated in the fourth quarter of last year as companies pared spending and stockpiles as deflation deepened. The final GDP rose at an annual rate of 3.8%, slower than the 4.6% rise reported last month the preliminary figures. The yen traded at 90.46 per U.S dollar from 90.40 before the report. The Yen edged up this morning, trimming some of its previous day’s losses. Yesterday the Japanese currency slid against all of its major counterparts, after a report showed that Chinese exports rose the most in three years, renewing investor demand for higher-yielding assets. However, today’s gains in the Yen were limited due to ongoing speculations that the Bank of Japan may be ease its monetary policy, as its remains under government pressure to help pull the country out of deflation. According to sources, the central bank is leaning towards a looser monetary policy, as early as next week, but there is disagreement among policymakers on its board on how to justify such a move.

Australian employers added the fewest jobs in six months in February, suggesting the central bank has room to slow the pace of future interest-rate increases. The number of people employed rose by a mere 400, far less than the predicted 15,200 and the previous month’s revised rise of 56,5000. The unemployment rate increased to 5.3% from a revised 5.2%. This pause in the longest employment boom in more than three years may push consumers to cut their spending in the coming months. This rise in the unemployment rate comes one week after the Reserve Bank of Australia Governor Glenn Stevens’s decision to raise the country’s benchmark interest rate by a quarter point to 4%, the fourth hike in five meetings. Following the report’s release the Australian dollar slipped to 0.91121USD, down 0.466% from its opening price of 0.91548USD.

During volatile trade last week, the Swiss franc neared a 7-month low against the U.S. dollar then made a slight recovery, as fears over Greece’s debt crisis eased and in the wake of unexpectedly upbeat U.S. jobs figures. USD/CHF hit 1.0739 at the end of trade on Friday, shedding 0.31%. Later today, Switzerland will announce a key interest rate decision, as well as publish its monetary policy assessment. The Swiss National Bank will release its decision on the Libor Rate, the London interest rate for 3-month Swiss franc deposits. The rate is expected to remain unchanged at 0.25%.

Written by Finexo.com