USD - The greenback fell as risk appetite picked up after last Friday's NFP employment report beat market expectations, and concerns eased over Greece's fiscal problems. The official headline US unemployment rate held steady at 9.7% last month, raising hope that the world's largest economy is improving, even though it still lost 36,000 jobs in February-more than the 26,000 lost in January. The Federal Reserve, in its latest Beige Book survey, said labor markets across the US remained weak, but some areas saw a rise in hiring. A fragile job market has been one of the main reasons the Fed is reluctant to raise rates, as they were expected to remain unchanged in the near-term. Markets will eye retail sales and University of Michigan entiment index, out this week, for fresh market movements.
EUR - The euro is modestly higher vs. the dollar following an easing of concern over Greece's debt situation. The single currency rose to highs of $1.3704 overnight and remains near the upper end of recent ranges above $1.3600. The euro was boosted after French President Nicholas Sarkozy pledged that the Eurozone would act to support Greece if needed. Talks of setting up a rescue fund to aid countries in distress by the European Commission helped alleviate concerns as Portugal also announced austerity measures in response to ballooning government deficits. Signs that the E-16 continues to recover are helping the euro. The ECB left rates unchanged at 1% last week as the Region's PMI was reported at 53.7 in February, firming its hold on the 50 threshold separating growth from expansion. Despite the positive signs, the fate of Greece and the other European countries facing budgetary difficulties will likely continue to determine the direction of the uro in the near-term.
GBP - The pound retraced moderately after 2 weeks of continuous sell-off; however, sterling sentiment still remains negative. Increasing probability of Britain electing its first minority government imposed fears in the market that the hung parliament will hamper efforts in reducing the nation's rising deficit-currently exceeding GBP 170B-sustained by declined tax revenue. Last week, the BoE left both the QE program and interest rates unchanged as expected. On the economic front, January's Trade Balance is scheduled to be released tomorrow, and is forecast to increase to -3.0B GBP from the previous -3.262B deficit. Improving trade figures supported by positive export data will further indicate that a weak sterling is crucial for further rebalance of the UK economy.
JPY - The yen softened against higher-yielding currencies as risk appetite rose on optimism that Greece may be rescued soon. However, the yen remains under pressure amid talk of further monetary easing from the Bank of Japan to combat deflation. The yen did not move much after Zhou Xiaochuan, governor of the People's Bank of China, comments hinting that China would abandon the 6.83 RMB per dollar peg sooner or later, which existed since mid-2008. The market was hoping that the yen would gain since a stronger Chinese currency would improve Japan's competitive position. Fiscal year end repatriation of funds will limit yen losses in the near-term.
CAD - The loonie continues to challenge its largest trading partner to the south as it benefits from risk appetite for emerging market, higher yielding and commodity based investments and their currencies. The Canadian currency added another 2.8% to its recent gains, opening last week at 1.0561 and then tracking unabated down to 1.0266 for a close to the session. Crude oil responded in kind, gaining 4.8% to hit its highest level since mid-January ($83.18) to close out the week at $81.94. Natural gas remains challenged falling a further 6.8% off its January high of $6.09 on lack luster seasonal demand for a close last week of $4.5970. The Bank of Canada held its benchmark lending rate at 0.25% last Tuesday confirming that the economy still has ground to make up before fully emerging from deficit territory. In positive data, Quarterly (Q4 5.0% vs.. 0.4% prior) and Month-over-Month (0.6% vs.. 0.4% prior) GDP readings showed nascent growth in the economy indicating a positive trajectory for the remainder f the year.
MXN - The peso saw the same emerging and commodity linked benefits as its counterparts last week, adding an additional 1.2% to it recent gains for its best showing since November of 08' to reach a low of 12.6261. Many analysts are still touting the peso as one of the most undervalued of the major trading currencies. With consumer and commodity prices, industrial production and GDP all on the rise and unemployment on the decline, combined with committed efforts to cut spending and shore up tax revenues by the Calderon government, the peso may be poised for further gains as the market sorts out risks to growth and investment opportunity. Mexico's government may increase its 2010 economic growth forecast for a second time this year if the country's recovery continues and budget and growth concerns in Europe subside, said Miguel Messmacher, chief economist for the Finance Ministry. Ironically, Consumer Confidence took at dip last week with the month-over-month reading dropping to 80.6 vs. the prior 82.1 reading. Expect a strong range bound peso for this eek's session as markets assess recovery.
AUD - The Australian dollar rose to 6-week highs vs. the Greenback trading above $0.91. The Royal Bank of Australia raised interest rates by 0.25% last week, bringing rates to 4% in response to strong domestic conditions. Australia is projected to grow 3% this year, setting the stage for further rate increases. The Aussie is projected to rise as high as $0.93 given the country's strong economic performance.