FOREX: Franc Falls, NZ Dollar Gains as Oil Drop Stokes Risky Assets

Overnight Headlines

• Swiss Franc Follows Oil Lower, NZ Dollar Outperforms on Easing Crisis in Libya
• Japan’s Current Account Surplus Shrinks as Exports Grow Least in 14 Months
• UK House Prices Improve as Forecast, Retail Sales Unexpectedly Slump in February

Critical Levels

The Euro edged higher in overnight trade as the rebound in risk appetite nudged the US Dollar lower but prices failed to recapture the 1.40 figure. The British Pound tracked sideways in a narrow range near the 1.62 level. We remain short NZDUSD.

Asia Session: What Happened

The Swiss Franc slumped while the New Zealand Dollar outperformed as a rebound in risk appetite weighed on the safe haven currency while boosting its sentiment-geared counterpart. The MSCI Asia Pacific regional benchmark stock index rebounded after yesterday’s sharp selloff as oil prices fell amid signs the Libyan conflict may inching toward a resolution, alleviating fears that increasingly expensive crude will derail the global recovery. The WTI contract fell as much as 1.45 percent after separate reports suggested Libyan leader Muammar Qaddafi a conditional truce (whereby he would leave the country) to rebel forces while other OPEC members pledged to join Saudi Arabia in boosting output to ease recent supply disruptions.

On the data front, Japan’s Current Account surplus narrowed to 461.9 billion yen in January as export growth slumped to the slowest in 14 months, with overseas sales adding just 2.9 percent from the previous year. A gauge of UK House Prices improved in line with expectations but Retail Sales slumped according to a report from the British Retail Consortium, with receipts down 0.4 percent from the previous year in February. BRC Director General Stephen Robertson said the release represents a “more realistic” picture of the current retail environment after a one-off boost in January ahead of an increase in VAT (a consumption tax).

Euro Session: What to Expect

Stock index futures tracking the major European bourses are pointing firmly higher, hinting the rebound in risk appetite noted overnight is set to carry forward into the coming session. On balance, this points to continued losses for the sentiment-linked New Zealand Dollar at the expense of safe havens like the Swiss Franc and Japanese Yen.

German Factory Orders data stands out on an otherwise uneventful economic calendar, with expectations calling for the annual growth rate to hit the lowest reading in four months. The trend in orders has been pointing lower since topping out in April, with today’s outcome threatening to temper buoyant ECB rate hike expectations (and thereby the Euro), reminding investors that underlying growth in the Euro Zone core is not as rosy as priced-in tightening expectations seem to suggest.

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