Daily Forex Analysis by Finexo.com 15/03/2010

Past Events:

• USD Core Retail Sales m/m, out at 0.8% versus expected 0.1%, prior 0.5% (revised)
• USD Prelim U-M Consumer Sentiment, out at 72.5 versus expected 74.0, prior 73.6 (revised)
• CAD Employment Change, out at 20.9k versus expected 17.5k, prior 43k
• CAD Unemployment Rate, out at 8.2% versus expected 8.3%, prior 8.3%

Upcoming Events:

• USD Empire State Manufacturing Index (1230 GMT)
• USD TIC Long Term Purchases (1300GMT)
• USD Capacity Utilization Rate (1315 GMT)
• USD Industrial Production Rate m/m
• USD Fed Rate Decision, Tuesday (1815 GMT)

Market Commentary:

Last week saw the Dollar retreat on most fronts. The week ended with the USD down 2.07% against the Euro and down 2.25% against the GBP. The week ahead will be dominated by US announcements, chief amongst them being the American Fed rate decision, due out on Tuesday at 18:15 GMT. An absence of job growth and few signs of inflation are reasons why Federal Reserve policy makers may decide to keep interest rates near zero.

Later today at 1300 GMT the Treasury International Capital Long Term Purchases report will be announced. This gauge represents the difference between foreign investments in the US and US investments abroad and shows foreign confidence in the US economy. The figure leaped to $126 billion two months ago, but was then cut to half. This time, it’s expected to stand at $38 billion.

Last week ended with Friday’s release of the University of Michigan preliminary Consumer Sentiment Index. This revealed that confidence among U.S. consumers unexpectedly declined in March, for the second month in a row. This is a strong signal that Americans are discouraged about the labor market. The prelim CSI fell to 72.5 from February’s final reading of 73.6. Economists had previously predicted that the index would increase to 74.

A separate report from the Commerce Department in Washington, also on Friday, showed that the U.S. retail sales report for February was better than expected. However, downward revisions to January sales numbers poured cold water on the result. Retail sales increased 0.3% in February and while stronger than the 0.2 percent decrease projected by economists, figures for the prior two months were revised down. January sales were revised downward to 0.1% overall.

Bucking the overall bearish trend, the USD and the JYP rose late last week amid concerns that tensions between America and China will continue to escalate boosting demand for the two currencies as a refuge. The increase came after Chinese Premier Wen Jaibao continued to insist last week that the Yuan is not undervalued. Japan’s yen strengthened versus 10 of its 16 major counterparts closing trading on Friday at 90.54 against the Dollar having opened the day at 90.60.

In Canada, the outlook was positive as more jobs than expected were created in February and the jobless rate fell to a 10-month low, cementing Prime Minister Stephen Harper’s view that the economic recovery is under way. The Canadian dollar surged after the report, strengthening to its highest level since July 2008-the Lonnie closed trading standing at $1.0191 against the USD on Friday. Employment rose by 20,900 last month, the fifth gain in seven months, Statistics Canada said. The rate of unemployment fell to 8.2 percent.

Over the weekend both the US and Canada moved in to daylight saving time. This is expected to have a significant impact on the forex market for the next two weeks as the major sessions between the US and the UK will overlap for five hours a day instead of four. During this time traders will have less time to react to data released in the British market before US data is released and can expect to see increased levels of volatility in the market.

Written by Finexo.com