Markets responded positively to yesterday's US Treasury Department proposed Public-Private Investment Program. The S&P rose a massive 7.1%, while the AUDUSD has broken strongly through the 0.7000 level (currently trading at 0.7040), as risk appetite got a boosted. EM and commodity currencies continue to see a significant demand. Asians currencies were stronger across the board, with the CNY forward curve forecasting appreciation of the first time in six months. On Monday, Fitch Ratings said "Mexico's inappropriate response to rising fiscal pressures could lead to credit rating downgrade” placing the countries BBB+ credit rating on negative outlook.
News and Events:
Markets responded positively to yesterday's US Treasury Department proposed Public-Private Investment Program. The S&P rose a massive 7.1%, while the AUDUSD has broken strongly through the 0.7000 level (currently trading at 0.7040), as risk appetite got a boosted. EM and commodity currencies continue to see a significant demand. Asians currencies were stronger across the board, with the CNY forward curve forecasting appreciation of the first time in six months. One of the lone exceptions to this broad USD selling was the MXN, which failed to rally due to concern over credit ratings. On Monday, Fitch Ratings said "Mexico's inappropriate response to rising fiscal pressures could lead to credit rating downgrade” placing the countries BBB+ credit rating on negative outlook. The economic downturn has put pressure on non-oil tax revenues and lower oil prices will demand that the Mexican government make some expenditure adjustments. The JPY was sold off against the majors, as traders anticipate tough goings ahead for the country (GBPJPY completion of head and shoulders now poised to head higher). We expect the YEN to stay weak as the prospects for global growth remains poor, leadership shaky, concern over banking sector and while the BoJ embraces quantitative easing more than their ECB counterparts. Overall the markets are excited about their new found ability to offload toxic asset and we expect the optimism to be sustained. A critical aspect of the US plan is that fact that it requires no additional legislation (ie removal of a significant barrier given the political climate) and will be seeded with pre-approved TARP money. According to Geithner US$75bn - $100bn to seed the program will come from the $700bn rescue fund Congress approved in October. The Legacy Loans Program portion will allow real-money investors (qualified institutions) to join in Public-Private Investment Funds that will pool their cash with Treasury capital / FDIC financing and to buy bank loans.
Today's Key Issues (time in GMT):
08:58 EUR "Flash" manufacturing PMI, index Mar 33.6 exp, 33.5 prior
08:58 EUR "Flash" services PMI, index Mar 39.2 exp, 39.2 prior
08:58 EUR "Flash" composite PMI, index Mar 36.2 exp, 36.2 prior
09:00 EUR Current account, ¤ bn (sa) Jan -7.3 prior
09:30 GBP CPI, % m/m Feb 0.2 (2.5 y/y) exp, -0.7 (3.0 y/y) prior
09:30 GBP Core CPI, % m/m Feb 1.3 y/y exp, -0.9 (1.3 y/y) prior
09:30 GBP RPI, % m/m Feb -0.2 (-0.8 y/y) exp, -1.3 (0.1 y/y) prior
09:30 GBP RPIX, % m/m Feb 1.8 y/y exp, -0.8 (2.4 y/y) prior
09:30 GBP BBA mortgage approvals, K Feb 23.4 prior
09:45 GBP BoE MPC members testify before Treasury Select Committee on February Inflation Report
10:00 USD FRB of Chicago President Evans sits on "Central Banking in Times of Crisis - Active Player or Passive Observer?" panel
10:00 EUR Industrial orders, % m/m Jan -6.0 exp, -5.8 (-25.0 y/y) prior
13:00 EUR ECB Vice-President Papademos sits on a panel during a conference entitled “After the storm: The new face of Europe’s financial system”
14:00 USD FHFA house prices , % m/m (y/y) Jan 0.1 (-8.7) prior
15:30 GBP BoE Governor King and MPC members Tucker and Dale testify at House of Lords economic affairs committee
18:00 USD Fed Chairman Bernanke and Treasury Secretary Geithner testify at House Committee on AIG
18:30 GBP BoE MPC member David Blanchflower speaks at Cardiff
20:00 EUR ECB Executive Board Member González-Parámo speaks at at II Noche de las Finanzas in Valencia
23:50 JPY Trade balance, bn JPY Feb -20.0 exp, -956.9 prior
The Risk Today:
EurUsd: Bull move started March 4th slowing as triple top at 1.3740 fails to break higher, initial Resistance at 1.3680. Initial support at 1.3563. Caution for the EURUSD bulls, 2 figure range could see downward pressure on Euro continue to build.
GbpUsd: Broken out of 1.4397 – 1.4601 range, initial resistance stands at 1.4740 on new month high. Upside risk is mostly uncapped, persistent bulls will see 1.4986 as strong resistance. On the downside, initial support sits at 1.4551, which would allow for a move a figure below at 1.4451.
UsdJpy: Overnight dollar strength has seen the pair push higher. Pivot on the 19th of March has seen trend carry on unscathed for 5 figures. Initial resistance is at 98.58 (new high), with initial downside level at 96.66 (38.20% Fibonacci level on 93.53 – 98.58 move).
UsdChf: Swissy has settled into a loose 1.1219 – 1.1302 range. Continued downside risk seen as Swiss haven shining through. Renewed momentum would see 1.1213 and eye 1.1161. On the upside we see 1.1318 as initial resistance, rebound would past 1.1459 would have sights on 1.1687.
Resistance and Support:
By Peter Rosenstreich - ACM Advanced Currency Markets, Geneva, Switzerland