Yen and Dollar Maintain Strength, Focus Turn to Obama's Briefing on GM

Risk aversion continues to dominate the forex markets as dollar and yen maintain earlier strength. Global stocks are sharply lower following the speculations that neither GM nor Chrysler submitted acceptable plans to White House to receive more bailout money. The automakers are facing possibility of bankruptcy. GM's CEO Wagoner was forced out, to be replaced by COO Henderson. Asian stocks are sharply lower with Nikkei closed down -4.5% o -390 pts while other Asian markets also closed more than 4% lower. European stocks are also under tremendous pressure with major indices down 2-3% even though markets halt after initially selling. US stock futures also point to sharp lower open later today. Obama will outline his ideas for GM at a briefing later today and that will be the main source of volatility.

On the data front, UK mortgage approvals rose more than expected to 38k in Feb, above expectation of 34k. Net lending to individuals rose to 1.3b as consensus expected. Nevertheless, the data provided little support to Sterling. Euro also remains pressured after data showed consumer confidence fell to another record low of -34 in March. Economic sentiment dropped to record low of 64.6 which business climate also dropped more than expected to -3.58. Japan's industrial production dropped -9.4 mom in February (consensus: -9.1%, January: -10.2%), the 5th consecutive monthly fall, with the biggest contraction in production of machinery and transportation equipment.

The Japanese yen is so far the biggest winner today with EUR/JPY and GBP/JPY now set to take on key near term support of 126.06 and 134.94. Dollar also maintains strength against major currencies except the yen. At this moment, intraday bias in the dollar index remains on the upside as long as 84.93 minor support holds and further rally should be seen to 61.8% retracement of 89.62 to 82.63 at 86.94 next.

Dollar

With an empty economic calendar in US today, focus will now turn to speeches by ECB President Trichet, Fed member Duke and BoC Governor Carney,