The euro appreciated vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.5370 level and was supported around the $1.5260 level. The common currency raced to a new lifetime high following remarks from European Central Bank President Trichet who cited short-term upward pressures on inflation. Notably, however, Trichet added the current monetary policy stance will contribute to reining in inflationary risks. The ECB today kept its main refinancing rate unchanged at 4.0% as expected and the central bank raised its forecast for 2009 inflation to a range of 1.5% to 2.7% from an average 1.8%. Concurrently, the central bank reported GDP growth should be around 1.7% in 2008 and 1.8% in 2009, down from previous estimates of 2.0% and 2.1%, respectively. Trichet noted economic uncertainty is unusually high and didnâ€™t give much indication that rates could come down later this year. Many traders are speculation the ECB could intervene by selling euros in the market. Trichet said the Bush administration has publicly indicated it is for a strong dollar and reported the ECB is paying extreme attention to such comments. At a time when U.S. economic growth is weak-to-none, the export sector is positively contributing to economic growth on account of the weak dollar, hence it may be unlikely the Bush administration would support intervention to buy the U.S. dollar. Data released in the eurozone today saw German January manufacturing orders fall 1.5% m/m. In U.S. news, data released in the U.S. today saw weekly initial jobless claims fall 24,000 to 351,000 while continuing jobless claims rose 29,000 to 2.831 million. Also, January pending home sales were down 19.6% y/y. Traders await tomorrowâ€™s February non-farm payrolls report with most forecasts focusing on new jobs growth of about 25,000. Boston Fed President Rosengren today said he supports the initiative announced by Fed Chairman Bernanke to avoid mortgage foreclosures. The Federal Open Market Committee is widely expected to reduce the federal funds target rate on 18 March and possibly again on 30 April. Some traders believe the Fed may orchestrate another intermeeting rate cut between now and 18 March. Cleveland Fed President Pianalto today said the U.S. economy is highly vulnerable to the U.S. credit crunch and said the Fedâ€™s policy response has been aggressive. The Fedâ€™s Beige Book was released yesterday and eight of the twelve Fed districts reported softening or weakening in the pace of business activity. Euro bids are cited around the US$ 1.5145 level.
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