9th of March 2011 - Fundamental Forex Market Overview

DAILY MARKET COMMENTARY
9 March 2011 – 8:00 GMT
Wednesday

____________________________________________________________________
Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
_____________________________________________________________________


FUNDAMENTAL ANALYSIS at 0800 GMT

USD

The dollar continued to strengthen gradually during the Asia session. The absence of news, combined with the prevalence of short dollar positions, suggests that an unwind of overstretched positions was likely at work over the past 24 hours. EURUSD traded between 1.3873 and 1.3924 and USDJPY between 82.61 and 82.94. Asian equities are marginally ahead at the time of writing, while the S&P 500 had closed up 0.89%.

There are no top-tier releases in the US ahead so positioning and external factors will likely continue to drive currencies. Our 1m forecasts, which we revised earlier in the week, reflect that sentiment favours the currencies of hawkish central banks in the near term, but we maintain our 3m forecasts on the basis of an improving US economy and continuing Eurozone debt worries.

EUR

Greek and Irish bonds remain under pressure, with their 2y spreads relative to Germany well above the rest of the Eurozone. S&P said it also sees more downgrades for Eurozone countries, though the ratings agency did not elaborate.

German factory orders grew faster than expected in January at +16.0% y/y and +2.9% m/m, compared to consensus expectations of +15.6% y/y and +2.5% m/m respectively.

ECB Governing Council member Nowotny said that the ECB is strictly keeping to the goal of price stability. Inflation is not seen as a threat if second-round price effects can be contained. He also said that the ECB never pre-commits to interest rates, although did acknowledge that "strong vigilance" is seen as a code word in the markets.

CHF

After the unemployment rate fell for February, the upcoming CPI release now takes centre stage. We look for an increase in both m/m and y/y CPI, though slightly below consensus (0.2% m/m vs. cons. 0.3% m/m, 0.3% y/y vs. cons. 0.4% y/y). An upward surprise on CPI could lend support to CHF but might not be enough to shake the SNB out of their current stance. Relative central bank tightening expectations continue to favour EURCHF upside.

AUD

More Australian economic data from January was released overnight. The latest data show more signs of strain as a result of the flooding in Queensland. Our Australian economists note that consumer confidence has fallen to a nine- month low, and the value of housing finance (excluding refinancing) dropped by 6.4% - the sharpest fall since March 2008.

NZD

Our analysts expect the RBNZ to cut the OCR by 50bp. Given that the consensus is only looking for a smaller 25bp cut, the NZD is likely to come under selling pressure immediately after the policy announcement. Clearly the policy statement is also likely to be highly influential, and any suggestion from Governor Bollard that he might consider easing policy further in the future is likely to add to any downside pressure on NZD.

A. M. Negrin Bautista, CFA

Chief Analyst at Fibosignals.com

DISCLAIMER: Fibosignals.com’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. Fibosignals.com assumes no responsibility or liability from gains or losses incurred by the information herein contained. Opinions, conclusions and other information expressed in this message are not given or endorsed by Fibosignals.com unless otherwise indicated by an authorized representative.