Previous session overview
USD traded lower yesterday pressured by a continued rebound in global equity markets and improving risk sentiment.
Trading flow among the three major currencies was thin in Asia as players stood on the sidelines ahead of a much-awaited two-day meeting of the Federal Open Market Committee starting Tuesday. However some European players, particularly hedge funds, were aggressively buying the common currency against the Swiss franc, dealers said.
The EUR continues to track the direction of equity markets but was also supported by report of higher than expected EU February inflation. The rise in EU inflation may make the ECB reluctant to cut interest rates further. Yesterday EURUSD traded with a low of USD1.2869 and a high of USD1.3070 before closing the day at USD1.2980.
The British pound experienced a volatile day of trading versus the US dollar, as the pair rallied for a test of USD1.4200 before falling and stabilizing above Fibonacci support at USD1.4065.
The Japanese Yen held to a tight range against the USD but the crosses all rose testing monthly highs on the AUDJPY and EURJPY. The JPY100 is a significant level that the market would need a major catalyst to test and remain above.
It was Groundhog Day for the Australian dollar in Asia Tuesday, with a better tone towards risk proxies and firmer regional equities pushing the commodity currency higher, but analysts cautioned the gains could easily reverse offshore.
Market expectation
The euro is slightly higher in quiet activity with the Federal Open Market Committee starting its two-day meeting later Tuesday, though it isn't expected to move on interest rates.
Traders said the higher Asian share markets were boosting short-term investor appetite for the higher-yielding euro, which is considered a riskier currency.
EURUSD moves back above USD1.3000 to USD1.3010 but seen running into a headwind, traders say. Traders expected to be wary of challenging the area between USD1.3025/40 due to strong sales seen in this area Monday from a US investment house, as well as this morning's sharp reversal off highs of USD1.3034.
Pound recovery extended to USD1.4080, after rate bounced back of support area between USD1.4030/20. Rate currently trades around USD1.4070. Offers now seen placed at that rally high, with stronger interest noted between USD1.4095/00.
EURGBP offers remain in place at stg0.9250/55, a break above to open a move on toward stg0.9295/0.9300 ahead of stg0.9320. Support seen placed at stg0.9205/00 ahead of stg0.9175/70.
Looking ahead, players will be watching for the tone of a speech by European Central Bank President Jean-Claude Trichet in Paris later in the global day. If he sounds dovish, the euro will likely fall, dealers said.
Most important events of the day
| 17-Mar | Count. | Event | For | Unit | Imp. | Act. | Cons. | Prev. |
| 0:00 | US | FOMC interest rate announcement | High | |||||
| 0:00 | JP | BoJ MPC Meeting (17th-18th Mar) | Low | |||||
| 0:30 | AU | RBA release minutes of prior (3rd Mar) board meeting | Low | |||||
| 6:45 | CH | SECO Economic Forecasts | Q1 | index | Low | |||
| 8:00 | EU | EU Economic and Monetary Affairs Commissioner Almunia and European Commission President Barroso speak at an event organised by the European Economic and Social Committee, Brussels | Low | |||||
| 8:15 | CH | Industrial Production | Q4 | % y/y | Med | 0.7 | ||
| 8:30 | NL | Retail Trade | Jan | % y/y | Low | 2.2 | ||
| 9:30 | GB | DCLG House Prices | Jan | % y/y | Low | -10.2 | ||
| 10:00 | DE | ZEW (Current Conditions) | Mar | Survey | Med | -86.2 | ||
| 10:00 | DE | ZEW (Economic Sentiment) | Mar | Survey | High | -5.8 | ||
| 10:00 | EU | ZEW (Current Conditions) | Mar | Survey | Low | -91 | ||
| 10:00 | EU | ZEW (Economic Sentiment) | Mar | Survey | High | -8.7 | ||
| 12:30 | CA | Labour Productivity | Q4 | % q/q | Low | |||
| 12:30 | US | Building Permits | Feb | k | Low | 510 | 531 | |
| 12:30 | US | Empire State Survey | Mar | index | High | |||
| 12:30 | US | Housing Starts | Feb | k | High | 453 | 466 | |
| 12:30 | US | PPI | Feb | % m/m | Med | 0.4 | 0.8 | |
| 12:30 | US | PPI ex food and energy | Feb | % m/m | Med | 0.1 | 0.4 | |
| 12:30 | CA | Manufacturing sales | Jan | % m/m | Low | -8 | ||
| 19:15 | EU | ECB President Trichet gives remarks at the 5th European Businesses meeting in Paris | Low | |||||
| 20:10 | GB | BoE Governor King to give speech at the Worshipful Company of International Bankers dinner | Low | |||||
| 23:30 | AU | Westpac-MI Leading Index | Jan | % y/y | Low |
