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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: ayn rand who wrote (27244)	3/2/2010 7:22:49 AM
From: DebtBomb	Respond to of 71456

British Pound Extends Decline, Euro Slips to Fresh Yearly Low The British Pound weakened against the greenback for the sixth day as investors scaled back their appetite for risk, with the exchange rate slipping to a low of 1.4854 during the overnight trade. Talking Points • Japanese Yen: Rallies Across the Board on Risk Aversion • Pound: Construction PMI Unexpectedly Tips Lower • Euro: CPI Estimate Weakens Further in February • U.S. Dollar: Vehicle Sales, Bank of Canada Rate Decision on Tap British Pound Extends Decline, Euro Slips to Fresh Yearly Low The British Pound weakened against the greenback for the sixth day as investors scaled back their appetite for risk, with the exchange rate slipping to a low of 1.4854 during the overnight trade. Meanwhile, U.K. Business Secretary Peter Mandelson said budget cuts will come, “but only when, the return to growth I secure,” and argued that “the shock to economic demand is so deep that the economy needs both continued fiscal and monetary stimulus.” As a result, the Bank of England is widely anticipated to hold the benchmark interest rate at 0.50% on Thursday, and is likely to maintain the option to increase the scope of its emergency program as policy makers continue to see a risk for a protracted recovery. Meanwhile, the economic docket showed construction in the U.K. unexpectedly weakened at a faster pace in February, with the PMI reading slipping to 48.5 from 48.6 in January, but conditions are likely to improve going forward as the expansion in monetary and fiscal policy continues to feed through the real economy. Nevertheless, market participants speculate the BoE to expand its asset purchase program over the coming months in an effort to mitigate the downside risks for growth and inflation, and expectations for further easing is likely to weigh on the exchange rate as investors scale back projections for a rate hike later this year. The Euro slipped to a fresh yearly low of 1.3434 following a rise in risk aversion, and the single-currency looks poised to test the lower bounds of the downward trending channel from the January high (1.4581) as price action hold below the 20-Day SMA at 1.3663. Meanwhile, the CPI estimate for the Euro-Zone slipped to an annualized rate of 0.9% in February from 1.0% in the previous month, while producer prices increased 0.7% in January, which was largely in-line with expectations. As price pressures remain subdued, the European Central Bank is likely to hold borrowing costs at the record-low of 1.00% at its rate decision later this week, and we may see President Jean-Claude Trichet hold a dovish outlook for future policy as the Governing Council maintains its one and only mandate to ensure price stability. U.S. dollar price action was slightly mixed overnight, with the USD/JPY paring the previous day’s advance to reach a low of 88.87, and the greenback could face some volatility going into the North American trade as equity futures foreshadow a higher open for the U.S. market. The economic docket for Tuesday remains fairly light, but nevertheless, the Bank of Canada is scheduled to announce its interest rate decision at 14:00 GMT, where investors expect the central bank to hold borrowing costs at the record-low of 0.25%. At the same time, market participants speculate the BoC to normalize policy this year and see a chance for the central bank conclude its emergency lending program this month, and commentary following the meeting is likely to shake up the currency market as investors weigh the prospects for a rate hike later this year. Will EUR/USD Price Action Continue to Hold Below the 20-Day SMA? Join us in the Forum Related Articles: Forex Weekly Trading Forecast - 03.01.10 To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com finance.yahoo.com