The US Dollar tumbled to record lows against the Euro and the Swiss franc on Thursday after the European Central Bank downplayed prospects of an interest rate cut and did not voice concerns about the rally in the Euro. Analysts said there had been some anticipation that ECB President Jean-Claude Trichet would comment on the Euro after remarks this week by euro zone finance ministers group chairman Jean-Claude Juncker that the common currency was overvalued. The ECB left its benchmark interest rate at 4% but raised inflation forecasts for this year and 2009. Central banks in United Kingdom and New Zealand also left policy on hold on Thursday at respectively 5.25% and 8.25%.
News and Events:
The US Dollar tumbled to record lows against the Euro and the Swiss franc on Thursday after the European Central Bank downplayed prospects of an interest rate cut and did not voice concerns about the rally in the Euro. Analysts said there had been some anticipation that ECB President Jean-Claude Trichet would comment on the Euro after remarks this week by euro zone finance ministers group chairman Jean-Claude Juncker that the common currency was overvalued.
News that US home foreclosures rose to record highs in Q4 also added to bearish investor sentiment towards the Dollar, helping to push it to historic troughs versus a basket of currencies. EurUsd jumped to 1.5396, its highest level since its launch in 1999. It was last trading at 1.5384, up 0.69%.
The ECB left its benchmark interest rate at 4% but raised inflation forecasts for this year and 2009. ECB staff also cut their prediction of GDP growth in the euro zone. With the Federal Reserve expected to cut its benchmark overnight lending rate by at least 50bp later this month as it fights to stave off an economic recession in the United States, market attention was focused on the yield play.
UsdJpy declined to a session low of 102.53 and UsdChf dropped to a record low at 1.0213.
Central banks in United Kingdom and New Zealand also left policy on hold on Thursday. GbpUsd hit the year’s high 2.0140 in a relief rally as markets had priced in a small chance of a British cut from the current 5.25%. NzdUsd was supported after the Reserve Bank of New Zealand said inflationary pressures remained persistent. The benchmark rate there is 8.25%.
Today’s Key Issues (time in GMT):
00:00 JPY Bank of Japan rate decision 0.5% vs 0.5%
09:00 NOK January Manufacturing output 2.9% vs -3.4%
12:00 CAD February Unemployment rate 5.9% vs 5.8%
13:30 USD February Non-Farm payrolls -25k vs -28k
20:00 USD January Consumer Credit $7B vs $4.5B
The Risk Today:
EurUsd Euro posted a new all-time high 1.5396 yesterday. Medium term trading range is still 1.4500 � 1.5600. Initial support hold 1.5144 Friday low. Psychological 1.5000 level marks strong support before 1.4500 pivot point. Initial resistance hold 1.5396 yesterday high.
GbpUsd Cable accelerate up to 2.0140 yesterday. Psychological 2.0100 former resistance level marks support. Renewed pressure below 2.0000 might reopen the way down to 1.9337 January low and 1.9105 (50% retracement of 1.7049 � 2.1162 advance). Further support holds 1.9630 former Trendline resistance.
UsdJpy It remains weak after last week 5$ drop. On the downside, further weakness might open the door down to 101.68 January 2005 low and 101.22 November 1999 low. On the Upside, only a return over 108 may open the way up to 110.10 strong (Trendline) resistance and mid January double top ahead of 111.92 early January high. Initial support holds 102.61 Monday low.
UsdChf Market remains weak. It hit yesterday 1.0211 low. Further weakness might open the way down to 1.0000 psychological level. Uptrend would return over 1.0700 and open the way for 1.1130 (38.2% of 1.1603 � 1.0838 decline). Early January double top 1.1191 marks strong resistance.
Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland