Opening Comment 03.23
The Greek bailout topic remains at the forefront of investor minds and many are now speculating as to whether or not Germany will in fact move to rescue Greece. Risk appetite had been weighed down early Monday on the back of some hard criticism from Greece’s deputy PM that Germany’s Merkel was allowing the local banks to make bets against Greece with the hopes for a weaker Euro. However, reassurances from ECB President Trichet that Greece would not be leaving the EMU, some upbeat comments from China’s Wen on US-China relations, and the passage of the Obama healthcare plan were all seen reinfusing investor appetite and helping to bolster the bid in currencies.
Elsewhere, the Bank of Japan Minutes were released and were less than clear on the central bank’s desire to adopt a more accommodative easing policy as had been vocalized by many officials in recent days. Nevertheless, the release failed to materially influence price action. The New Zealand Dollar has found some fresh bids over the past few hours after local think tank NZIER announced that it expects the economy to grow at a faster pace. On the topic of reserve currencies, Fed Lockhart has come out with a rather neutral stance on the USD after saying that while the US has had the privilege of being the reserve currency of choice, this should not be taken as something permanent.
Fed Evans has also been out in recent hours with his outlook on the economy, saying that he expects the US economy to grow by 3-3.5% this year but also warns that the impact of the stimulus will ease in the second half of 2010. Evans has come out on the dovish side after also saying that current market conditions still warrant substantial accommodation. Meanwhile, China’s Wen has been going to great efforts to try and defuse the possibility of a currency war as more pressure builds in the US on citing China as a currency manipulator.
Looking ahead, data in the European session is all about the UK. UK CPI (0.5% expected) is slated for release at 9:30GMT, along with the retail price index (219.1 expected) and BBA loans for house purchases (36500 expected). UK CBI distributive trades data then caps things off at 10:00GMT. US equity futures and commodity prices are not that much moved on the day with both markets trading mixed. All currencies are near daily opening levels, with the Canadian Dollar slightly outperforming, while Yen lags.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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