Daily market commentary

12, Mar 2010

The euro has gained over a cent against the USD. Economic data certainly helped the move with Euro zone Industrial Production coming out much better than expected at +1.7% month on month and +1.4% year on year, the expectation was for +0.7% and -1.9%. The positive industrial production data can be held in stark contrast to the dire figures from the UK earlier in the week- the weather in the UK was blamed for the downturn in the UK…mmm they had bad weather in Europe too. Another reason for euro strength could be attributed to a US investment bank’s recommendation to go long on EUR/USD with a target of 1.45…could be a good position. Speculation that authorities will help tackle Greece at the EU summit on Thursday and news that ECB president Jean Claude Trichet will leave Sydney early to attend a gathering of EU leaders is helping confidence in the euro. Although the euro has weakened since December the downturn, recently it has consolidated well and market confidence could easily return to buying the euro if the EU handle the Greece problem effectively.

Sterling has also ridden higher against the USD back over 1.51…the spike in confidence and the euro gains against the USD have driven this move higher- it still needs to hold above 1.52 to encourage the markets to buy sterling further. With the budget in the pipeline I think the markets will be nervous to buy into sterling next week.

In other news Japanese PM Hatoyama has stated that steps need to be taken against the recent strength of the Yen. We have seen some Yen weakness in the markets with EUR and GBP gains in particular. The economic conditions do not reflect the strength of the currency and the Yen has been favoured as a safe haven in uncertain market conditions. If the Japanese authorities continue to complain on the strong Yen and global economic sentiment improves the Yen could be in for a big sell off with levels of USD/JPY to 105 and GBP/JPY up to 150- one to watch..

report by Phil McHugh

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