Forex market report 23/03/09
- Risk appetite sees euro remain strong against majors
- Cable breaks back over $1.46 as the greenback is sold off
- US plan to remove banks toxic assets from their books weighs on dollar
- Aussie and New Zealand dollars gain as commodities rally
- Norwegian Krone takes advantage of higher oil and risk appetite rise
US plan to remove banks toxic assets from their books weighs on dollar
Aussie and New Zealand dollars gain as commodities rally
Norwegian Krone takes advantage of higher oil and risk appetite rise
US Dollar: Friday saw the dollar ease its slide against the majors, as the fallout from the US Federal reserve’s quantitative easing decision eased slightly, but the dollar is still weaker this morning. The greenback has now weakened enough for two key levels to be broken on the pound and euro, with $1.46 and $1.37 be broken respectively. Although the Fed’s quantitative easing announcement late Wednesday sent the dollar reeling, currency trading had calmed down as markets wait for the evidence that the exercise will work in terms of improving credit conditions and helping bring an end to the US recession. Looking ahead to this week, we have the final figure for fourth quarter gross domestic product, which is expected to show a steeper drop in US economic activity than previously reported. Data on February home sales will also be reported, while more retailers will post quarterly results. Data 14.00: Existing Home Sales MoM expected –0.9% from –5.3%. Speakers 14.00: Fed’s Rosengren.
Pound: The rise in risk appetite late last week helped sterling’s position against not only the dollar, but also put a stop for the pound’s decline against the euro. With cable breaking back over the $1.46 level, a gain of seven cents has been posted since last Wednesday, with investors selling the buck and buying more so called ‘”riskier” asset, helping boost the pound. This move helped the pound gain over a cent on the single currency, as GBP/EUR hit 1.0654 this morning. The move into so called riskier assets has not been good news for the pounds position against all currencies, as sterling’s position against the higher yielding Aussie and Kiwi dollars slipped, with commodities rallying. The pound has however kept its fairly strong position against the Canadian dollar, despite a gain in Oil prices. It seems the Canadian dollar was dragged down by a sell off for the greenback. No data.
Euro: The euro has continued its rise on the dollar this morning, confounding its gains made late last week. EUR/USD has now broken over the $1.37 level, with investors opting to buy riskier assets with higher returns, which has benefited the single currency. This has however, seen a slight fall against the pound with over 1% lost since last Wednesday, hitting 0.94 this morning. Looking ahead, focus s for the markets will be on the US’s administration’s plans to deal with toxic assets within banks. The focus will be on Geithner’s press conference. The euro is possibly moving up ahead of this. Traders expected downside for the euro to be contained, and more gains possible if risk aversion ebbs further. Data at 10.00: E/Z Trade Balance Jan.
• The Aussie and Kiwi dollars have both benefitted from the rise in risk appetite, as we see investors move funds out of currencies and more into commodities, such as gold and crude oil, in reaction to the trend towards printing money in most major economies. The pound has lost ground on the back of this.
• The Norwegian Krone has also been a beneficiary of the Fed’s move, cashing in not because of the improvement in risk appetite that took place after the Fed’s announcement, but also because of a rise in crude oil prices. Crude oil has now rallied back over the $52.00 per barrel.
These rates are for indication purposes only.
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