Forex Investment and Currency Trading

In an overnight session thinned by a Japanese holiday, USD continued to rally as DXY reached a one week high of 72.843. Commodity currencies were the largest losers, with both CAD and AUD dropping by more than 1% against USD. Commodity prices continued to fall overnight adding to yesterday’s losses, with gold trading down towards USD900, touching a low of USD905.41. Asian markets followed the lead of US equities with HIS falling 3.47%. European stockmarkets failed to buck the trend as DAX, CAC, and AEX all drifted lower and FTSE100 dipped 0.57% at the time of writing. With much of Europe and North America heading into a four day weekend, price action is likely to remain choppy and stop-driven.

Top of today’s data agenda in the US is the March Philly Fed survey. The normally-close relationship with the Empire survey (which fell 11 point to -22) suggests considerable scope for a downside surprise in the headline index to the market forecast of -19. Given the backing off in Fed rate cut expectations and associated USD rally yesterday, a negative surprise on the Philly could damage USD sentiment significantly. Feb Leading Indicators (consensus -0.3%) and initial jobless claims (consensus 360K) are also released later today.

USD/CAD rallied to a high of 1.0266 overnight, a level not seen since Jan 22^nd. The move was driven by a combination of USD strength, and oil falling back through USD100.00/bl as profit taking in commodities pushed prices lower. Today’s  Jan leading indicators (consensus 0.1%) and Feb international securities flows (consensus C$1.9bn)- are second tier.

EUR/GBP fell 1% overnight to a low of 0.7800. Feb UK retail sales were much firmer than expected on a headline basis, 1.0%m/m, 5.5%y/y (vs. cons -0.2%, 3.6%), but the sectoral breakdown of these data paints a gloomier picture of the UK consumer. BoE’s Barker sounded relatively downbeat late yesterday; suggesting house prices may fall this year and acknowledging that the credit crunch had made mortgages more difficult to get. Barker speaks again later today, standing in for BoE Deputy Governor Gieve at a CBI lunch.

EUR/USD drifted lower overnight on the back of strengthening USD. The preliminary estimate of the Eurozone March PMI’s points to a softening of activity but is accompanied by indications of rising price pressures. The manufacturing PMI edged down from 52.3 to a 5-mth low of 52.0 in line with consensus. While services sector PMI showed activity slipping from 52.3 to 51.7 undershooting expectations of 52.0, and was notable for the increase in pricing power with output prices rising from 52.0 to 53.7.