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Daily Forex Commentary
Tuesday, 9 March 2010 - Market Commentary:: United States Dollar: The dollar firmed over the course of trading yesterday, on the back of positive news from Fannie Mae and Freddie Mac, two US government sponsored enterprises who deal in US home loans. Spreads on bonds offered by these two agencies narrowed to 0.63% above 10 year treasuries, indicating an improvement in mortgage delinquencies and a reduction in defaults. Lower rates in the US have filtered through to mortgage payers, and loans used as collateral are now safer than they once were, making borrowing easier. Access to credit for small to medium sized businesses is easier than a year ago, supporting growth in the medium to long term. In the UK, PricewaterhouseCoopers, the accountancy firm has warned that Britain needs to raise 20 billion pounds through tax raises and spending cuts to plug the hole in the rising fiscal deficit. The pound sold off on this and on the back of further talk of a hung parliament. We moved back from a high of 1.5195 to levels below 1.5000 this morning.
- We expect a range today in the GBP/USD rate of 1.4950 to 1.5100
:: Euro: Yesterday the IMF released a statement noting that Greece would not need any form of bailout. The IMF’s managing director Dominique Strauss-Kahn insisted that whilst it was on hand to offer support if needed, Greece will resolve its debt crisis without intervention. This is indeed supportive for the Euro, but many investors worry that this is a form of verbal intervention, and merely an attempt to keep speculative selling at bay. The Greek Prime Minister George Papandreou has called upon officials in Washington to introduce measures to help stop speculative trading activity (in Greek bonds and insurance on said bonds). Although this is unlikely to happen it is indicative of the length Papandreou will go to try and stave of costly rises in refinancing government debt, which is positive for the outlook in the near term. The Euro crept higher against the pound, moving to 0.9085 this morning. Against the dollar, positive news in the US pushed EUR/USD from just above 1.3700 down to 1.3600 where we open this morning.
- We expect a range today in the GBP/EUR rate of 1.0930 to 1.1100
:: Aussie and Kiwi Dollars: Australian job advertising grew dramatically in February according to a survey released by the ANZ Banking Group. The total number of job advertisements on the internet and in local press rose by nearly 20% in seasonally adjusted terms. Additionally, business confidence jumped to its highest level in four months, adding further luster to an already gleaming economy. Talk of even higher rates in Australian financial press dominated headlines overnight, with many expecting rates at, or close to, 5% by year end. The Aussie crept higher against the dollar yesterday, to a high of 0.9135 before selling off slightly to 0.9080. We open above 0.9100 this morning. In New Zealand, manufacturing confidence rose despite sales falling further. The New Zealand Manufacturers and Exporters Association’s business conditions survey showed that total manufacturing sales fell by 3% compared to the previous year. A high AUD/NZD exchange rate is likely to be supportive in the medium term, and any positive news from Australia relating to demand will drive exports and support growth. The Kiwi traded up to 0.7030 yesterday before selling off to levels around 0.7000 where we open this morning. GBP/AUD and GBP/NZD traded down to levels below 1.6450 and 2.1415 respectively.
- We expect a range today in the GBP/AUD rate of 1.6400 to 1.6500
- We expect a range today in the GBP/NZD rate of 2.1350 to 2.1550
:: Data Releases:
- AUD: Home Loans (m/m) / Westpac Consumer Sentiment
- EUR: No data of note
- GBP: Trade Balance Figures
- NZD: Overseas Trade Index (q/q)
- USD: IBD/TIPP Economic Optimism Index
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