The USD remains broadly in demand as traders continue adjusting positions to hawkish Fed expectations on next week’s FOMC meeting (Mar 17/18th). USD/JPY traded better bid in Tokyo, alongside with Nikkei stocks 1.39% higher on the session. BoJ’s Kuroda said the inflation should rise with wages and improvement in inflation expectations. With higher US yields, USD/JPY should continue challenging 122 offers on the upside. Large vanilla bids will give support above 120.00/50 before the week close. EUR/JPY recovers slightly as sell-off in EUR/USD and EUR/GBP curbs. The EUR-negative sentiment remains strong however. Resistance builds stronger pre-130.
USD/CAD tests the January highs (1.2799) as weakness in crude oil continues. Trend and momentum indicators are marginally positive, suggesting a potential interest for new 6-year highs if market expectations for poor labor data materializes. Combined to hawkish Fed positioning, decent vanilla bids are waiting above 1.27 before March 18th FOMC decision.
In a report released yesterday, Fitch stated that 3.75 levels in USD/BRL would bring exporters to their competitive position before 2004 as the inflation hit companies’ cost structure over the past decade. We remain cautious on these comments as lower real would reinforce the steepening in inflation trend in Brazil, which in turn, should further weigh on the currency. Is improvement in competitiveness really part of the picture given the tight relation between inflation and the exchange rate? USD/BRL extends gains to 3.1714, sturdier bullish momentum and strong USD appetite will certainly prevent traders from holding BRL-long position through the week-end. The key resistance stands at 3.2420 (May’04 high).
The Russian Central Bank gives policy verdict today. The consensus is a rate cut from 15% to 14%, or more. The rate cut should trigger limited sell-off in RUB given the still-very-high rates and restrained RUB trading outside Russia.
The economic calendar today: Italian February Final CPI y/y, Italian January Government Debt, UK January Construction Output m/m & y/y, Canadian February Unemployment and Participation rate, Canadian February Existing Home Sales m/m, US February PPI m/m & y/y, University of Michigan’s March preliminary Sentiment Index and 1-yr/5-5yr Inflation Expectations.
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Market is solidly negative on EUR/USD, bullish attempts find sellers. We hear talks on further cut on deposit rates to allow the ECB to widen its pallet for bond purchases (as ECB is not allowed to buy bonds yielding more negative than the deposit rate). The EUR/USD will step into the FOMC week without having resolved the Greek issue. Tensions between Greece and Germany mount adding to downside pressures. EUR/GBP pares losses (after Mar 11th 0.70143 low) as GBP/USD extends weakness to 1.4846. With stronger bearish momentum, the break below 1.4814 (Jul’13 low) should happen in smooth fashion. Decent option barriers at 1.4980/1.50 will weigh on the Cable at today’s expiry.USD/CAD tests the January highs (1.2799) as weakness in crude oil continues. Trend and momentum indicators are marginally positive, suggesting a potential interest for new 6-year highs if market expectations for poor labor data materializes. Combined to hawkish Fed positioning, decent vanilla bids are waiting above 1.27 before March 18th FOMC decision.
In a report released yesterday, Fitch stated that 3.75 levels in USD/BRL would bring exporters to their competitive position before 2004 as the inflation hit companies’ cost structure over the past decade. We remain cautious on these comments as lower real would reinforce the steepening in inflation trend in Brazil, which in turn, should further weigh on the currency. Is improvement in competitiveness really part of the picture given the tight relation between inflation and the exchange rate? USD/BRL extends gains to 3.1714, sturdier bullish momentum and strong USD appetite will certainly prevent traders from holding BRL-long position through the week-end. The key resistance stands at 3.2420 (May’04 high).
The Russian Central Bank gives policy verdict today. The consensus is a rate cut from 15% to 14%, or more. The rate cut should trigger limited sell-off in RUB given the still-very-high rates and restrained RUB trading outside Russia.
The economic calendar today: Italian February Final CPI y/y, Italian January Government Debt, UK January Construction Output m/m & y/y, Canadian February Unemployment and Participation rate, Canadian February Existing Home Sales m/m, US February PPI m/m & y/y, University of Michigan’s March preliminary Sentiment Index and 1-yr/5-5yr Inflation Expectations.
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