Putting aside the plethora of important economic data releases, this should still be an important event filled week to say the least. In the Eurozone, The Eurogroup of 16 Eurozone Finance Ministers is due to convene in Brussels today, then the wider Ecofin group of 27 on Tuesday. Obviously, the issue of Greece and potential solutions will be high on their agenda. The media buzz / speculation has been mixed, with a slight lean (perhaps it makes for better news) that some bailout solutions will be announced. However, we still believe that EC drag their feet as long as possible in the hopes that markets normalize and any shift in the original tone of the Maastricht Treaty completely avoided. Baring any official commitment on aid, we believe the EUR will continue to be sold on rallies (especially given uncertainty around Greece to re-finance debt maturing in the Spring). Generally, BoJ's two-day meeting is hardly a mark in FX trader calendar. However, this week's should warrant a great deal more attention. In recent weeks, the government pressure on the BoJ has intensified, including today's comments from Japanese FM Kan, who stated that the BoJ has been working and will continue to work with Government to beat deflation and the central bank understands Government's expectations through discussions in Parliament. A number of media reports have speculated that the policy board is ready to introduce measures necessary to create an even loser form of monetary policy. While we believe QE is around the corner, with policy rate of 0.1% there is not much room for further contraction. Without a wider US-Japan yield differential, USDJPY upside will be limited (unless we see FX decouple form yields). In the UK, the BoE MPC minutes are due on Wednesday and markets expect a unanimous vote to hold monetary policy unchanged. There has been a growing call for further quantitative easing from several members and we expect that additional £25bn asset purchases remains in place. However, the timing of the increase will be variable, based heavily on CPI coming down. In this environment, we expect the GBP to come under significant selling pressure (already hearing grumbling over low liquidity). The US and USD will start the week on a high note, as retail sales came in much better than expected rising 0.3% vs -0.2% exp., despite the severe February weather. The FOMC rate decision on Tuesday should be pretty run-of-the-mill, with the accompanying statement reiterating policy rate 'exceptionally low' for an 'extended period' and even mentioning positive progression in economic conditions. And if this was not enough to keep FX traders busy, the minutes from the RBA's March meeting will also be released. The minutes should help market determine if expectations for a June hike is overly optimistic or is a July or August more realistic. And on a final note, Prime Minister Wen Jiabao threw cold water on last week's CNY appreciation exuberance. Wen Jiabao said that the CNY wasn't undervalued and rejected other nations' unwarranted political pressure. With the US Treasury Department delivering its biannual report to Congress in April, we expect things to heat up further. Overall, in this environment, especially considering the Greek situation and UK potentially reinstating their QE, we favor long USD and EM positions. We are high suspicious of any JPY strength and would be looking to fade positive news.
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