The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2810 level and was supported around the $1.2680 level. The common currency moved higher on account of a couple of factors. First, the Obama administration announced a US$ 3.55 trillion budget plan for 2010 and that would push the deficit to a record US$ 1.75 trillion. Taxes will be moving higher for taxpayers earning the most money, Medicare will be cut, and more financial assistance would be provided to troubled financial institutions. U.S. Treasury issuance will likely need to rise by record amounts to finance the Obama spending plan. Data released in the U.S. today saw January durable goods orders off 5.2% m/m and 23.3% y/y. Also, January new home sales were off 10.2% and months of inventory climbed to 13.3. The U.S. housing market continues to weaken precipitously. Other housing data saw January housing starts off 16.8% with building permits off 2.9%. Also, weekly initial jobless claims climbed to 26-year highs last week, up 36,000 to 667,000, while continuing jobless claims were up 114,000 to 5.112 million, the highest level since at least 1967. In eurozone news, German February consumer price inflation will be released tomorrow. February EMU-16 consumer confidence fell to a record -33 and EMU-16 January private sector loan growth eased to 5.0% from an annualized 5.8% growth rate in December. Also, mortgage lending growth eased to 1.0% from 1.5%. Additionally, the German GfK consumer climate index rose 2.6 points in March, beating expectations of a decline. The ECB reported M3 money supply fell 0.8% m/m and nearly 25% y/y, the steepest monthly decline since at least 1980. Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.70 level and was supported around the ¥97.30 level. There is increasing speculation that Japan is covertly orchestrating a weaker yen to counter its deepening economic recession. U.S. House of Representatives Financial Services Chairman Frank is urging Japan to not devalue the yen through “massive currency market interventions.” Data released in Japan today saw sales conditions at Japanese small and mid-size firms at their lowest levels since 1984 with the February index at -44.6, down from -37.4 in January. The Nikkei 225 stock index lost 0.04% to close at ¥7,457.93. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥126.05 level and was supported around the ¥123.80 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥141.65 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.75 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8361 in the over-the-counter market, down from CNY 6.8369.

GCI Financial

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