The euro gained marginal ground vis--vis the U.S. dollar today as the single currency tested offers around the US$ 1.5675 level and was supported around the $1.5530 level. Technically, todays intraday low was just below the 23.6% retracement of the move from $1.4440 to $1.5905. Federal Reserve Chairman Bernanke testified before Congress today and warned the U.S. economy may contract in the first half of the year but did not suggest the Fed will definitely reduce interest rates on 30 April. The May federal funds futures contract is implying about a 66% chance the Fed will reduce its fed funds target rate by 50bps to 1.75% at the 30 April Federal Open Market Committee meeting, and the likelihood of a 75bps reduction is around 45%. Data released in the U.S. today saw February factory orders off 1.3% while the ex-transportation component was off 1.8%. Likewise, orders for non-defense capital goods excluding aircraft were off 2.4% in February. Also, the ADP jobs report indicated the U.S. economy gained 8,000 private jobs last month, significantly above the expectation of 70,000 job losses. In eurozone news, EMU-15 February producer price inflation was up 0.6% m/m and up 5.3% y/y. European Central Bank member Weber reported is it too early to give an all-clear on the current financial crisis. Germanys DIW institute lowered its 2008 German GDP forecast to 2.0% from its previous estimate of 2.1%. Euro bids are cited around the US$ 1.5345 level.
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