ECB president Trichet said Monday the ECB is concerned by excessive forex moves, causing a knee-jerk drop in EUR/USD. He also reiterated the G7 mantra and his usual stance of excessive volatility and disorderly forex moves are undesirable, and noted with extreme attention the US statement that a strong USD is in the US’s interest. EU’s Almunia said Monday that sharp forex movements are undesirable and that excessive volatility is a matter of concern. He said the Eurozone pays attention to US statements on the desire to have a strong USD, and that the marked appreciation of the Euro vs the dollar, the yen and the yuan does not fully reflect macroeconomic realities. He said the effective appreciation of the East Asian currencies would help adjust imbalances.

UK Producer Prices

A report Monday showed significant upside inflation risks in the UK, reducing speculation of a sure rate cut from the Bank of England next month. UK producer prices came out more than expected and matched the fastest annual pace since 1991 in February. Prices at factories rose 5.7% in February from a year earlier, the same rate as in January. Raw material costs rose 19.4% on an annual rate, the highest since records began in 1986.

Forex Trading

The US dollar remains pressured against other currencies as traders mull over the possibility of a 75 bp rate cut by the Fed. Goldman Sachs noted a chance of an intra meeting cut today from Fed, which has gotten attention. However, Goldman added that the “baseline” expectation is for no cut. Euro’s upside momentum has slowed down although it remains at elevated levels against the US dollar and the yen. Trichet’s assertion of a strong dollar policy has so far caused only a shallow pullback of the Euro (intraday low at 1.5310); the market is not that convinced Trichet will pull off a coordinated intervention against Euro’s rally.

Tuesday:

UK NIESR GDP estimate 0001 GMT

ECB’s Trichet and Weber to hold press conference 0400 GMT

German ZEW survey 1000 GMT

US trade balance 1230 GMT

Canada international merchandise trade 1230 GMT

UK leading indicator 1530 GMT

Australia Westpac consumer confidence 2330 GMT

BOJ releases minutes of policy meeting, GDP 2350 GMT

Posted in Categories: Forex.

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