Currency Overview: A Quiet Finish To The Week

Overall: The overnight session moved somewhat slowly, losing some of the strong momentum seen in the last few days of trading. One explanation for this could be the diminishing volume seen during the U.S. equity rally seen over Tuesday, Wednesday and Thursday, because volume remained light during Friday's N.Y. session and a smaller trading range was seen. The big event will be the G20 meeting of finance ministers over the weekend ahead of the April 2 meeting of G20 government leaders.

In U.S. economic news, the trade balance for January 2009 narrowed by 9.7% to a deficit of $36.0 billion, the Commerce Department said today. It was the smallest deficit in 6 years. January's exports were $124.9 billion, down $7.6 billion (-5.7%) from December, while imports totaled $160.9 billion, down $11.5 billion (-6.7%) from the previous month. The numbers reflected a sharply slowing global economy. Also, the Reuters/University of Michigan preliminary index of consumer sentiment climbed to 56.6 this month from 56.3 in February, after reaching a 28-year low of 55.3 last November.

The Euro (Eur/Usd) traded almost flat in the early part of the overnight session, but picked up momentum as the market headed towards the European session. However, the euro was still not able to break decisively in either direction, and the trend continued in N.Y. as stocks moved between small gains and losses on the day.

Retail sales in the Euro-area rose slightly in January, following a 0.3% (revised) decline in the previous month. From one year ago, retail sales fell 2.2% in January, from 2.4% in December. The January release was pulled higher, on a monthly basis, by the non-food sector, which grew 0.4%, but the food, drinks and tobacco sub-index declined 0.3%. From one year ago, both the food and non-food sectors are down by 2.4% and by 2.2% respectively.

The Pound (Gbp/Usd) fell to the neutral pivot point during the Asian session, but surged higher shortly after the London open. The pair gained almost 200 pips and even managed to break above the 1.4000 swing area. The pound has appreciated in three straight overnight sessions, but was little changed in N.Y. with a slight decline.

The Aussie (Aud/Usd) tried, but failed, to hold above the 0.6570 area in the overnight session. The pair’s resistance area is formed by the 50 and 100-day simple moving average. As with the pound, the pair was little changed in N.Y. with a slight decline.

The Cad (Usd/Cad) struggled in the Asian session to break below the 1.2770 area, the place where it also bottomed one day earlier. The pair managed to break lower during the London open and started to create a decent downtrend. The pair was mostly higher in N.Y., but was little changed as oil fell about 1.8% on the day.

The Swissy (Usd/Chf) traded virtually flat in the overnight session as the rest of the market was selling the dollar. Traders might have been reluctant to send the swissy lower after yesterday the SNB announced it will start intervening to weaken currency. The pair has actually traded within a very tight range since about 30 minutes after the SNB made its announcement.

The Producer Price Index in Switzerland decreased in February from one month earlier by a 0.6%, much more than expected. The Swiss PPI shows deflation, for the time being, after producer inflation reached a new record in previous months. February is the seventh consecutive month in which the inflation rate has slowed being dragged lower by the huge declines in the energy market

The Yen (Usd/Yen) tested the neutral pivot point (97.30) in the Asian session, but bounced higher. From then on, the pair advanced during both the Asian and European sessions. Additionally, the yen tested the high of the last day of trading during the European trading hours, but was flat in N.Y. as stocks basically stayed in neutral.