Euro Retreats On Trichet and Juncker’s Comments

The US ISM index of manufacturing activity in February decreased to 48.3, from 50.7 in January and 48.4 in December. Although February’s result is better than the 48.0 forecast, it is the lowest reading since the index hit 46.1 in April 2003. US construction spending, on the other hand, fell much more than projected: total spending decreased by 1.7% at a seasonally adjusted annual rate of $1.121 trillion, versus a forecast drop of 0.7%. The 1.7% drop was the sharpest since a 3.6% drop in January 1994, and was the fourth consecutive decline.

Canada’s GDP increased less than expected at just 0.2% on a quarterly basis or at a 0.8% annual rate in the fourth quarter, sliding sharply from an upwardly revised 3% in the previous three months. This is the slowest rate of expansion since the second quarter of 2003 as exports shrank the most in more than six years as the Canadian dollar rose to record highs.

Forex Trading

EUR/USD reached another record high around 1.5280 but retreated after ECB’s Trichet said at a meeting of Euro-area finance ministers in Brussels that the US government’s strong dollar policy is “very important”. He said, “In the present circumstances, I consider very important what has been affirmed and reaffirmed by the U.S. authorities, including the secretary of the Treasury and the president of the United States of America, according to whom a strong-dollar policy is in the interests of the United States.” Luxembourg Prime and Finance Minister Jean- Claude Juncker said he’s “starting to become increasingly concerned and vigilant” on the Euro.

Shortly after the forex market opened Monday, USD/CHF lost its footing and swiftly fell almost 100 pips from 1.0400 to another all-time low around 1.0300. Its nearest resistance is around 1.0500-30. An extended lower move would point it down towards 1.0250, 1.0200. USD/JPY fell to another three-year low to 102.60.

Tuesday:

Australia retail sales 0030 GMT

Reserve Bank of Australia rate decision 0330 GMT (expected to raise from 7% to 7.25%)

Swiss CPI, GDP 0645 GMT

UK PMI construction 0930 GMT

Eurozone PPI, GDP 1000 GMT

Fed’s Bernanke speaks in Florida 1400 GMT

Bank of Canada rate decision 1400 GMT (expected to cut from 4% to 3.75%)

Fed’s Mishkin speaks to economists 1400 GMT

Fed’s Fisher speaks on inflation, growth 1800 GMT

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