Overall:The dollar strengthened on Friday as economic releases were positive, overall, and comments from FDIC Chairman Sheila Bair that the heads of some banks may be replaced, pushed equity markets lower. The economic calendar was loaded with important releases from most regions and those releases also played into the dollar strengthening. A stronger contraction than expected in the European economy sent the euro lower, concerns about the Canadian economy sent the cad higher and although Swiss retail sales beat expectations, concerns about the central bank intervening in the currency helped the swissy move higher. For the week, the dollar closed stronger against all of the other major currencies with the exception of the Japanese yen. The DOW lost approximately 100 points on Friday while the S&P gave up 12 points. Oil prices fell be more than $2 a barrel while gold prices posted small gains.

U.S. core CPI came in higher than expected this morning with a read of 0.3% while the broader based number was in line with expectations at 0.0%. Empire state manufacturing showed improvement with a read of -4.6. Economists had projected a -12.1 number. International demand for long term U.S. financial assets rose in March as the TIC data came in at 55.8B, higher than the 33.3B expected. Industrial production improved from one month earlier, coming in at -0.5% as expected.   

The Euro (Eur/Usd) The euro dropped 150 pips on Friday as the European economy contracted the most in 13 years leading traders to speculate that the economic downturn has not yet hit bottom and recovery will be slower than expected. The pair tried to rebound after the U.S. economic releases but negative equity markets led to the dollar strengthening pushing the pair lower. The pair closed just below the 1.3500 level but above the 200 day simple moving average.
The Pound (Gbp/Usd) There were no U.K. economic releases on Friday and the pound actually held up nicely against the dollar. The pair did lose 70 pips on the day, but traded within the range we have seen all week. The pair weakened at the London open but was able to retrace the moves with ease, but resumed its downward movement during the U.S. session as the dollar strengthened across the board. For the week, the pair lost 60 pips.

The Aussie (Aud/Usd) Weaker equity markets and gold prices moving essentially sideways, led to the aussie dropping 100 pips on Friday. The dollar strengthened across the board as equity markets dropped and U.S. economic reports came in positive. There were no Australian economic releases last night but RBA Governor Stevens will speak Monday night ahead of the monetary policy meeting minutes being released.

The Cad (Usd/Cad) Falling equity markets, a strengthening dollar and worse than expected Canadian manufacturing sales led to the Canadian dollar weakening against its U.S. counterpart on Friday. Canadian manufacturing sales decreased 2.7% in March to $41.4 billion, reversing February’s gains. With this decline, manufacturing sales have fallen almost 25% from their peak reached in July 2008. On the day, the pair gained 100 pips, closing just below the 1.1800 level.

The Swissy (Usd/Chf) The swissy moved much higher on Friday, gaining almost 200 pips, despite Swiss retail sales posting a 1.2% read, better than the decline of 2.2% that was expected. The franc came under pressure on speculation SNB officials sold the currency in order to halt the advance of the Swiss currency. The pair closed the day above the 1.1200 level and gained approximately 170 pips for the week.

The Yen (Usd/Jpy) Lower equity markets led to traders, once again, becoming risk averse and buying the Japanese currency. The pair dropped approximately 60 pips on the day closing just above the 95.00 level and being supported by the 100 day simple moving average. For the week, the pair dropped 350 pips. Next week’s economic calendar is on the light side for Japanese releases but we will have an interest rate decision on Thursday and the BOJ press conference early Friday morning.