Opening Comment 03.25
The USD rally has certainly made an impact on some of the other markets, with global equities and commodity prices selling off on what appears to be a flight to safety move. A high degree of uncertainty in the global economy and specifically in the Eurozone has been attributed to the latest elevation in risk aversion, and the downgrade of Portugal in the previous day has certainly not helped matters.
The topic of the Yuan and pressures for the Chinese to revalue its currency remains a hot one, with Chinese Vice commerce minister Zhong echoing some recent local sentiment that the country will not be pressured into forcing a reminbi appreciation and that the Yuan is not was is driving the US trade deficit. Treasury Secretary Geithner however has said that it is quite likely that China will indeed move on the Yuan over time.
One currency that has received some positive attention overnight has been the Australian Dollar, which has found some fresh bids following some hawkish and currency supportive comments from RBA’s Lowe, and a stamp of approval from the RBA financial stability review. Assistant governor Lowe has said that he sees rates higher despite any uncertainty in the global economy and feels that the Australian Dollar should trade above its average from the past decade over the next few years. Some of Lowe comments have however been mitigated after saying in a Q&A session that rates are 50bps below where they should be, to suggest that only two more hikes are planned. Meanwhile, he RBA financial stability review has given the thumbs up to its financial system, saying that the local economy has been resilient and that funding conditions have improved.
Also out with some hawkish comments has been Fed Kohn who says that the Fed could and would tighten policy well in advance of any threat to price stability. One more central banker on the wires Thursday, with BOJ Kamezaki talking on the dovish side after saying that more QE could be in the mix with falling rates possibly not enough to boost economic activity.
Looking ahead, German GfK consumer confidence (3.1 expected) is due at 7:00GMT, followed by Eurozone M3 (-0.1% expected) at 9:00GMT. Attention then turns to the UK, with retail sales (0.0% expected) capping things off for the European session at 9:30GMT. US equity futures and commodity prices have been consolidating the latest round of setbacks and are yet to show any fresh direction thus far.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel's reports in a more timely fashion, e-mail email@example.com and you will be added to the "distribution" list.
If you wish to discus this topic or any other feel free to visit our Forum page
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.