Forex Commentary: Euro And British Pound Up Against The US Dollar

Euro

The euro appreciated vis-à-vis the U.S. dollar today (Monday) as the single currency tested offers around the US$ 1.3735 level and was supported around the US$ 1.3485 level.  Traders are talking about U.S. Treasury Secretary Geithner’s plan announced today wherein the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation will work with private investors in a “public-private partnership” to purchase troubled assets.  The government will allocate US$ 100 billion in funds from the Troubled Asset Relief Program (TARP) and additional private investment to generate at least US$ 500 billion in purchasing power to purchase “legacy assets.” This program could expand to US$ 1 trillion and most of these details were already priced in the market.  The government is expected to assume most of the risk with regard to this new plan and it remains to be seen how popular the new plan is in reducing systemic risk in the market.

Data released in the U.S. today saw February existing home sales rise 5.1% to 4.72 million annualized units while existing home sales fell 15.5% to US$ 165,400.  Also, the Chicago Fed’s national activity index  printed at -3.48 for the three-month period ending in February, up from -3.61 in the three months ending in January.  In eurozone news, the German government will revise its economic forecasts on 29 April and it is likely the current forecast of a 2.25% contraction for 2009 will be downwardly revised.

Data released in the eurozone saw the EMU-16 January trade deficit widen to -€10.5 billion.  European Central Bank member Weber reiterated the central bank has “room to maneuver” and said “unconventional” policy measures remain under discussion.  Euro bids are cited around the US$ 1.2385 level.

Japanese Yen

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥97.35 level and was supported around the ¥95.40 level.  Technically, today’s intraday high was right around the 61.8% retracement of the move from ¥99.65 to ¥93.50.  The government released its January - March corporate sentiment survey and it weakened substantially to -51.3 from -35.7 in the October - December quarter.  These data suggest the Bank of Japan’s next quarterly Tankan survey could be extremely weak.  Other data released today saw residential and commercial land prices decline.  The Nikkei 225 stock index climbed 3.39% to close at ¥8,215.53.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥132.25 level and was supported around the ¥130.15 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥141.85 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥86.30 level.  In Chinese news, the U.S. dollar closed at CNY 6.8335 in the over-the-counter market.  People’s Bank of China Governor Zhou today reported “The reestablishment of a new and widely accepted reserve currency with a stable valuation benchmark may take a long time.”

British Pound

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4650 level and was supported around the $1.4450 level.  Bank of England Monetary Policy Committee member Blanchflower reported the jobless total may grow to more than 3 million.  Blanchflower also reported it is better for BoE to err on the side of too much quantitative easing because there are tools to deal with hyperinflation but less to deal with hyperdisinflation.  Cable bids are cited around the US$ 1.4410 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.9285 level and was capped around the ₤0.9430 level.

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