Euro Rally Likely to Stall Before Rate Decision

The US dollar started last week by recovering against most other currencies, but on Friday, lost ground against the Euro, Swiss franc and the British pound after worse-than-forecast NFP data which showed a net job loss of 80,000 in March, the most in five years, and the national unemployment rate rising to 5.1%. It was the third straight month of jobs decline, and is setting off yet another alarm the US may already be in a recession. In a rare and largely unexpected move, Fed’s Bernanke acknowledged last Wednesday, for the first time ever, that a recession was possible. Perhaps he and his colleagues have figured out it would just look lame to keep reassuring people things are floating instead of going under when it is quite obvious the US economy is under a lot of stress from different angles, namely, the housing, credit and financial markets. Surely the Fed must be seen to be more in tune with what’s going on compared to George Bush. By the way, both George Soros and the International Monetary Fund have declared the current US financial crisis to be the worst since the Great Depression.

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Forex Trading

The bad payrolls data didn’t set off a big upward move in EUR/USD on Friday, but that could partly be due to Euro bulls being unwilling to bid the Euro higher ahead of the G7 meeting taking place in Washington this coming Friday. EUR/USD’s nearest resistance around 1.5800, 1.5850-60. USD/CHF’s nearest support is around 0.9980-1.0000.

What Will G7 Say?

ECB Vice-President Lucas Papademos said Saturday European officials won’t be altering their message on forex rates at the upcoming G7 meeting. “It will be the same message,” Papademos said on the sidelines of a European Union summit near the Slovenian capital. ECB officials often voice their concern of “excessive moves” and “excessive volatility” in the forex markets, and say that a “strong dollar” is in the interest of the US economy. ECB President Trichet again said on Friday, “Excessive volatility is counterproductive from a standpoint of (economic) growth.”

Events

The ECB and BOE will announce their interest rate decisions on Thursday, and G7 meeting will commence on Friday.

Monday:

Australia trade balance 0130 GMT

Swiss unemployment 0545 GMT

German industrial production 1000 GMT

Canada building permits 1230 GMT

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