Asian Stocks Fall as Aussie, Korean Won Weaken on Europe, Economic Outlook

By Lynn Thomasson and Norie Kuboyama - Dec 8, 2011 1:41 PM GMT+0700

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Dec. 8 (Bloomberg) -- Michael Kurtz, chief Asian equity strategist at Nomura Holdings Inc., talks about the outlook for Asian financial markets and his investment strategy. Kurtz speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Dec. 8 (Bloomberg) -- Wilfred Sit, Asia chief investment officer for Baring Asset Management, talks about the outlook for Asian financial markets in 2012 and his investment strategy. Sit speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up" .(Source: Bloomberg)

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Dec. 8 (Bloomberg) -- David Roche, president of Independent Strategy and a former Morgan Stanley global strategist, talks about the impact of the European sovereign debt crisis on financial markets and the outlook for the global economy. Roche speaks with John Dawson, Angie Lau, Zeb Eckert and David Ingles on Bloomberg Television's "Asia Edge." (Source: Bloomberg

Asia stocks (MXAP) and the South Korean won fell as Europe’s leaders struggle to resolve the sovereign-debt crisis and reports showed unexpected declines in Japanese machinery orders and Australian employment.

The MSCI Asia Pacific Index retreated 0.7 percent as of 3:31 p.m. in Tokyo. The Nikkei 225 Stock Average dropped from a one-month high and Australia’s currency fell against most of its 16 major counterparts. The won sank 0.5 percent to 1,131.43 per dollar. The yield on 10-year benchmark Treasuries was little changed at 2.03 percent following the biggest decrease in almost a month yesterday. Gold for immediate delivery slid 0.2 percent.

The European Central Bank may announce a range of measures today to fight off a recession as leaders in the region meet to lay the foundations for a fiscal union. The Bank of Korea and the Reserve Bank of New Zealand cited risks of slowing economic growth after leaving borrowing costs unchanged. A Bloomberg poll of global investors showed 61 percent of respondents predict China (MXCN) will face a banking crisis in the next five years.

“As the meetings get closer, investors have turned cautious,” said Masaru Hamasaki, who helps oversee the equivalent of $24 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “There’s been a switch from a feeling that we were going to get some visibility on the situation to a cooler stance, where people are in a wait-and-see mood.”

Euro Area Lending

The euro was little changed at $1.3409. The ECB will cut the benchmark interest rate by a quarter percentage point to 1 percent, according to 53 of 58 economists in a Bloomberg News survey. Policy makers may also loosen collateral criteria to give banks greater access to cheap cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations.

More than two shares fell for each that rose in the MSCI Asia Pacific Index today. The gauge jumped 8 percent last week, the most since August 2007, after the Federal Reserve and five other central banks lowered the cost of dollar funding and China cut the proportion that banks need to hold as reserve capital.

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent to 1,262.80. Jobless claims in the U.S. probably fell to 395,000 last week from 402,000 the prior week, economists in a Bloomberg News survey estimated before a Labor Department report today.

Singapore’s Straits Times Index (FSSTI) slumped 1.7 percent as developers tumbled. The government imposed additional taxes on purchases of private residential property to curb excessive investment after home prices rose for nine quarters.

‘More Cautious’

“People are somewhat more cautious,” said Terrace Chum, Hong Kong-based managing director of greater China equities for Manulife Asset Management, which oversees $199 billion. “Europe will continue to be a drag as problems there aren’t going to be resolved so soon.”

Australia’s S&P/ASX 200 slid 0.3 percent. The so-called Aussie weakened 0.3 percent to $1.0266. The number of people employed fell by 6,300 after a revised increase of 16,800 in October, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 22 economists was for a 10,000 advance.

The Nikkei 225 (NKY) fell 0.7 percent, paring an earlier drop of 1.1 percent. Machinery orders, an indicator of capital spending, slipped 6.9 percent from a month earlier, the Cabinet Office said in Tokyo. The median forecast of 27 economists surveyed by Bloomberg News was for a 0.5 percent gain.

Tepco Slumps

Tokyo Electric Power Co. tumbled for a fifth day, losing 11 percent. The company whose power plant is at the center of the worst nuclear emergency in 25 years will be taken over by the government and most of the management replaced, the Mainichi newspaper said, without giving the source of the information.

Prime Minister Yoshihiko Noda’s Cabinet is debating Tokyo Electric Power Co.’s situation, and it is “too early” for ministers to discuss whether to nationalize the utility, Chief Cabinet Secretary Osamu Fujimura told reporters in Tokyo.

The cost of insuring Asian corporate and sovereign bonds against non-payment increased, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rising 3 basis points to 191 basis points, Royal Bank of Scotland Group Plc prices show. That’s the highest since Dec. 6, according to data provider CMA.

Copper gained for the first time in three days, adding 0.2 percent to $7,833 a metric ton. Oil gained 0.3 percent to $100.74 a barrel.

Gold ETFs

Gold for immediate delivery declined 0.2 percent to $1,738.6 an ounce. Holdings in bullion-backed exchange-traded funds dropped to 2,356.716 metric tons yesterday from the all- time high of 2,358.206 tons on Dec. 6, according to Bloomberg data.

The Shanghai Stock Exchange Composite Index was little changed after erasing an earlier decline of 1.3 percent on speculation that China may further loosen monetary policy to combat slowing growth. Hong Kong’s Hang Seng Index (HSI) fell 0.9 percent.

Data tomorrow may show China’s industrial output increased 12.6 percent last month, the slowest pace since August 2009, based on the median forecast of economists surveyed by Bloomberg. Consumer prices probably increased 4.5 percent from a year ago, compared with a 5.5 percent rise in October, according to the Bloomberg survey.

To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Sep 09 11 04:26 GMT

As was widely expected no policy changes were announced after either the MPC or ECB meetings yesterday. Despite the decisions votes seemingly being in line with expectations, the markets at least initially reacted with a degree of disappointment to this news. However, ECB Chairman Trichet's subsequent press conference which emphasised that the risks on both inflation and economic growth had shifted caused German bonds to rally and the euro to sell off. As usual there was no statement from the BoE following the MPC meeting and so no evidence as yet as to whether the Committee's thinking has also shifted, although this must be highly likely. The minutes of the meeting, which will be released on the 21st will provide the first information on this. In the meantime, in a further indication of how consensus thinking is shifting the OECD announced a downward revision to its global growth forecasts yesterday.

The August UK PPI figures released today are likely to signal a nearterm easing of inflationary pressures. Last month, sterling's tradeweighted index moved higher, while commodity prices have weakened. Together, these developments point to a fall in input prices. Meanwhile, producer output prices are expected to be unchanged. We still have longer-term concerns about the UK inflation outlook, but given mounting concerns about growth this is unlikely to be at the forefront of policy makers' thoughts for now.

In the euro area today's data on Italian GDP and French industrial production will provide further information on the real economy. Both are likely to be reassuring as they should show slow growth, rather than rapidly falling output. But as they both refer to the period before the current market turbulence gathered pace, they are likely to be seen by markets as old news.

UK remains vulnerable to global price pressures

About the Author

Lloyds TSB Bank

Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Daily Forex Technicals | Written by Easy Forex | Sep 09 11 04:16 GMT

FX Technical Commentary

Euro 1.3925

Initial support at 1.3837 (Jul 12 low) followed by 1.3837 (July 12 low). Initial resistance is now located at 1.4220 (Sept 5 high) followed by 1.4288 (Sept 2 high)

Yen 77.45

Initial support is located at 76.55 (Sep 2 low) followed by 75.95 (Psych level). Initial resistance is now at 77.70 (Aug 25 high) followed by 78.86 (Aug 8 high).

Pound 1.5985

Initial support at 1.5921 (Sep 6 low) followed by 1.5781 (Jul 12 low). Initial resistance is now at 1.6061 (Sept 5 high) followed by 1.6334 (Aug 31 high).

Australian Dollar 1.0625

Initial support at 1.0419 (Aug 26 low) followed by the 1.0363 (Aug 22 low). Initial resistance is now at 1.0666 (Sept 5 high) followed by 1.0734 (Sep 2 high).

Gold 1863

Initial support at 1805 (Sept 8 low) followed by 1757 (Aug 29 low). Initial resistance is now at 1880 (Sept 7 high) followed by 1921 (Sept 6 high).

Oil 89.40

Initial support at 88.00 (Intraday Support) followed by 85.00 (Intraday Support). Initial resistance is now at 90.00 (Intraday resistance) followed by 92.50 (Intraday Resistance).

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3752	1.3837	1.3925	1.4149	1.4288
USD/JPY	75.95	76.55	77.45	77.70	78.86
GBP/USD	1.5781	1.5921	1.5985	1.6061	1.6334
AUD/USD	1.0363	1.0419	1.0625	1.0666	1.0734
XAU/USD	1757.00	1805	1863	1880	1921
OIL/USD	85.00	88.0	89.40	90.00	92.50

Easy Forex

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

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Douglas Peterson to Become President of S&P

Standard & Poor’s future president Douglas Peterson. Photographer: Haruyoshi Yamaguchi/ Bloomberg

By Katrina Nicholas and John Detrixhe
Aug 23, 2011 12:07 PM GMT+0700

Standard & Poor’s, the ratings company that downgraded the U.S. AAA credit ranking for the first time, will replace President Deven Sharma with Citibank NA Chief Operating Officer Douglas Peterson.

Sharma, 55, will leave at the end of the year to “pursue other opportunities,” S&P’s parent McGraw-Hill Cos. said in an e-mailed statement. Peterson, 53, will take over Sept. 12 and Sharma will work on the company’s strategic review.

S&P’s Aug. 5 decision to reduce the U.S. credit rating to AA+ roiled global markets and boosted demand for Treasuries, sending the yield on the 10-year note, the benchmark for home mortgages and car loans, to a record low 2.03 percent. The New York-based company, which was blamed in an April Senate report for helping fuel the credit crisis, was criticized by the world’s most successful investor, Warren Buffett, who said the U.S. should be “quadruple-A.” The cut conflicted with Moody’s Investors Service and Fitch Ratings, which kept AAA grades.

“It looks like he’s being helped out the door,” Noel Hebert, a credit strategist at Mitsubishi UFJ Securities USA Inc. in New York, said in a phone interview. “If it was a planned retirement, it should have been handled in a different way.”

Peterson, Sharma

Peterson was approached by McGraw-Hill in March, a person with direct knowledge of the talks said. He was chief executive officer of Citigroup Japan from 2004 to 2010 and was hired by the New York-based investment bank out of business school 26 years ago, according to an internal memo outlining his departure, whose contents were confirmed by Shannon Bell, a Citigroup spokeswoman in New York.

Peterson, who has an undergraduate degree in mathematics and history from Claremont McKenna College and a MBA from the Wharton School at the University of Pennsylvania, began his career in Argentina as a corporate banker and became Citigroup’s country manager in Costa Rica and then Uruguay, according to the memo.

Sharma, who joined S&P in 2007 as the global credit crisis was unfolding, will exit as McGraw-Hill faces mounting pressure from some of its shareholders to separate into four units. Jana Partners LLC and Ontario Teachers’ Pension Plan, which together own a 5.2 percent stake, presented a plan Aug. 22 to split the group, saying it has “consistently underperformed its potential” and is trading at “a sizable discount.”

Company Split

Since Aug. 5, the day of the downgrade, McGraw-Hill’s shares have lost 11 percent compared with a decrease of 6.3 percent for the S&P 500 Index (SPX), according to data compiled by Bloomberg. McGraw-Hill’s stock rose 0.1 percent to $37.04 yesterday.

Chief Executive Officer Terry McGraw said last month the company is conducting a strategic portfolio review after announcing in June plans to sell its broadcasting group. Sharma will work on the review until December.

In November, S&P was divided between McGraw-Hill Financial and the credit rating service. After the split, Sharma is “ready for new challenges,” according to the statement.

Sharma holds a bachelor’s degree from the Birla Institute of Technology in India, a master’s degree from the University of Wisconsin and a doctoral degree in business management from Ohio State University. He joined McGraw-Hill in January 2002 from consultants Booz Allen Hamilton, where he was a partner.

He was appointed president in August 2007, one month after S&P started lowering its ratings for hundreds of mortgage-backed securities, acknowledging that notes it originally deemed safe were now worth little.

S&P’s revenue grew 10.4 percent to $1.7 billion in 2010, from $1.54 billion a year earlier, Bloomberg data show.

“Since Sharma came in, he has done little to enhance the credibility or reputation of the ratings agency,” Joshua Rosner, an analyst at the New York-based research firm Graham Fisher & Co., said by phone. “Given the recent downgrades, it appears their operational management and ratings modeling have not been meaningfully strengthened.”

To contact the reporters on this story: Katrina Nicholas in Singapore on knicholas2@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net.

To contact the editor responsible for this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net

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Sunrise Market Commentary

• US Equities ended slightly lower on Thursday due to a late session pull-back. This morning, most Asian shares trade slightly up, while Japanese stocks ended the session a little lower.
• As the results of stress tests on the Irish banks were revealed, the government announced a radical shake-up of the industry aimed at restoring investor's confidence in Ireland's banking sector, which remains dependant on the ECB. Ireland's banking sector will require €24 billion in additional capital.
• Portugal revealed yesterday that its missed the 2010 budget goal as the gap reached 8.6% of GDP in 2010, above the 7.3% target. Lisbon added that the upward revision was due to a simple accounting change demanded by Europe's statistics agency rather than any attempt to deceive.
• The Federal Reserve could raise rates by the end of this year, sooner than expected by financial markets, according to comments made by Fed's Kocherlakota. The Minneapoliss Fed president signalled the Fed could raise benchmark rates by three-quarters of a percentage point by the end of the year.
• Rebels cheered the defection of a Libyan minister as a sign that Gaddafi's rule was crumbling, but US officials warned he was far from beaten and made clear they feared entanglement in another painful war.
• China's central bank may have to raise both interest rates and reserve requirements in April to combat a possible jump in consumer inflation to a nearly three-year high, a government researcher said.
• Japanese manufacturers' business sentiment improved slightly in the three months to March, the Bank of Japan's closely watched tankan survey showed, but a downturn in confidence is expected for this quarter as 72% of replies for the survey came in before the earthquake.
• Chinese factories raised production a touch in March while cost inflation slowed, early signs that China was scoring some success in taming prices with its gradual monetary tightening.
• Today, the eco calendar is well-filled with the US payrolls and manufacturing ISM, the euro zone (final) and UK manufacturing PMI and euro zone unemployment rate.

Markets

Global markets had an overall quiet trading session ahead of the US payrolls release today and despite a high number of interesting eco and headline news. Yesterday's session cannot be simply described as a 'risk on' or 'risk off' day. Commodities, including oil, made substantial gains, equities closed narrowly mixed in the US and modestly (Germany) to substantially lower (Spain/Italy) in Europe. In the FX market, movements weren't too important, but the euro was well supported versus the US dollar and sterling, while the dollar made gains versus the yen. Global bonds remained under some modest downward pressure with German yields up between 3.3 bps and 0.8 bps, flattening the curve. Also in the US, the curve flattened bearishly, which resulted in yields up by 4 to 7 bps at the 2-to-5-year and somewhat lower further out of the curve. The peripherals traded generally uneventful ahead of the publication of the Irish stress tests (see below) with the Portuguese debt making the exception and the country now very close to throwing in the towel and asking for EFSF support (see below). Global core bonds were 'hit' by the higherthan- expected EMU inflation data that played right in the card of hawkish ECB and by another set of strong German labour market data. The latter contrasts with the situation in the peripherals and might become a problem inside EMU. In this respect, remarks of ECB's Wellink are worth citing: 'the strong economic pick-up in Germany makes clear that a recovering economy comes with higher inflation and therefore a higher benchmark interest rate'. If the ECB would not deliver this, he added, its credibility in Germany may suffer.

Intra-day, global core bonds started the day on the same footing as they ended yesterday. They traded quietly with an upward bias until the publication of the March CPI data for the euro zone. Inflation rose unexpectedly from 2.4% to 2.6%, which pushed the Bund down and German yields higher, especially on the short end of the curve, up. The drop of the Bund was however short-lived and gradually struggled higher again to about opening levels. However, there was some renewed weakening in midmorning US session, this time in sympathy with the US Treasuries. The US eco data were mixed with factory orders a tad weaker, but with a solid and above consensus Chicago PMI. The market barely reacted, but somewhat later, talk about positioninginduced selling took global bonds lower.

Review eco releases

Yesterday, the first estimate of euro zone CPI inflation for the month of March came out significantly higher than expected. CPI rose from 2.4% Y/Y to 2.6% Y/Y, while an unchanged reading was expected. Earlier released national data show that upward surprises were mainly based in Spain and Italy, which was probably due to the changed methodology. Nevertheless, these data provide further evidence that CPI inflation is running further away from the ECB's target, which supports the ECB's view that action on rates is needed. In the US, economic data came out mixed, with the claims and factory orders somewhat weaker, while the Chicago PMI came out slightly stronger than expected.

Peripheral news and markets

The INE statistics agency announced that it has upwardly revised the Portuguese budget deficits and debt-to-GDP ratios for the last two years. Portugal's budget deficit reached 8.6% of GDP in 2010, above the previously commented 7.3% target with Brussels. The 2009 deficit was revised from 9.3% to 10%. The debt to GDP ratios for 2010 and 2011 are now seen at respectively 92.4% (up from 82.8%) and 97.3% (up from 88.8%). The changes in last year's deficit came after a visit by Eurostat and the inclusion of capital injections at nationalised bank BPN and the accounts of three pubic transport companies. The worse debt/deficit data, which were mostly due to accounting issues and not skeletons falling out of the cupboard, is the latest in a series of events recently (collapse of government, several downgrades, yields reaching euro lifetime highs) that extends Portugal's walk of shame and takes away the (now caretaker) government's last bit of credibility. The optics of the moves do not look good and are reminiscent on what occurred in Greece. Portugal announced after the closure that it will hold today a special 1-year Note auction for an amount of €1.5B. It apparently has specific demand for such a Note and it is rumoured that Brazil will be the buyer. It is however still unlikely that will be enough to avoid a bail-out. The Portuguese yields increased further and the 2-year yield exceeded the 10- year, with the yield spread of the latter breaching the 500bps. The National Bank of Belgium on the contrary had better news and announced that the country's debt load increased less than initially estimated, as its 2010 budget deficit narrowed more than the caretaker government had previously expected. The 2010 budget deficit decreased to 4.1% of GDP from 5.9% in 2009 and compares to a previous estimate of 4.6%. The debt to GDP ratio was downwardly revised from 97.5% to 96.8%. Similarly the French deficit and debt levels were reported lower than hitherto assumed.

Irish stress tests

The Irish stress tests revealed that Irish banks need an additional €24B of capital injection, which was close to expectations and falls within the amount of capital the bail-out package had reserved (€35B). The total bill for the clean up of the banking sector mess is now about €70B, approaching 50% of GDP. The Irish government will restructure the sector and merge the main four banks into two centred on Allied Irish and Bank of Ireland. All may end up nationalized. There had been speculation that the ECB would put a medium term funding facility into place for the Irish banks, but apparently, there was resistance in the Council and earlier remarks of ECB's Stark indeed pointed to resistance. However, the ECB declared officially that it would continue to accept Irish sovereign debt as collateral regardless its credit rating and promised banks continued access to liquidity. The Irish government promised to deleverage and downside the balance sheets of the banks. According to the press, the Irish government would drop its threat to impose losses on senior unsecured bonds in both remaining banks. The Irish central banker suggested that a lower rate on the bail-out package was a possibility over time and added that its ability to meet its deficit and debt targets would depend on a return to growth. We need to examine more closely the arrangement and have more still missing information to judge whether it might put Ireland on the road to recovery. We think that the market will be cautious in its attitude and do expect the spread to remain (unsustainable) high for the time being. It might be that the financing of the Irish banks might again entirely go through the ECB repo-operation (instead of partly via the ELA). This might pose problems if the ECB would decide to go back to the variable rate procedure (in QE-3?) or does it mean that the ECB will be obliged to continue its Full Allotment procedure for longer.

Fed comments

Interesting comments from Fed policymakers yesterday: it seems the hawks have started a campaign to make their point that policy cannot stay as accommodative for much longer than it is now. Richmond Fed Lacker suggested the Fed should trim its QE-2 programme by $100B, a suggestion already ventilated by governor Bullard before and for which also Hoenig and Fisher would vote. However, these members (maybe partially with the exception of Bullard) are the hard core hawk wing from which nothing else can be expected. However, there seem to get other governors on board too. Minneapolis Fed Kocherlakota (late yesterday), quite influential with well-known moderate hawkish tendencies but who fully supported the QE policy, surprised by suggesting that if core inflation would move to 1.3% Y/Y by the end of the year, the Taylor rule would call for a raise in the target rate by more than 50 bps. While the majority of the FOMC still wants to complete the QE-2 unaltered (confirmed by governor Pianalto, who spoke yesterday and even didn't exclude more QE if needed) the debate on the exit of the monetary very accommodative policy is open. In this respect, the speech of NY Fed Dudley, a key FOMC member with outspoken dovish profile, this afternoon might be worth giving all attention. Eco data preview and Markets today

Today, the eco calendar contains not only the eye-catching US payrolls report, but also the US manufacturing ISM, euro zone (final) and UK manufacturing PMI and euro zone unemployment rate. Fed's Plosser, Dudley and ECB's Bini Smaghi are scheduled to speak. Portugal holds a surprise 1-year Note auction

After three consecutive months of very disappointing payrolls data, last month's February report finally met expectations, partially due to a weather-related rebound after the weak January report. In February, non-farm payrolls rose by 192 000, the biggest monthly increase since May 2010, when payrolls were boosted by the Census. For the March report, the question is whether this decent February figure can be confirmed. The consensus is looking for an increase at almost the same pace (190 000), while the weather related boost will have faded, which indicates a significant underlying improvement in jobs growth. Although we expect to see some improvement in the payrolls data, we believe that the consensus might be a bit too optimistic. Manufacturing payrolls were probably strong, but construction payrolls will be significantly weaker than in February. Besides that, also the late Easter holiday poses a risk for the payrolls in the retail, hotel and food sectors. The unemployment rate is forecasted to stay unchanged at 8.9%. In the US, the manufacturing ISM reached a multi-year high in February. For March however, the consensus is looking for a slight decline (from 61.4 to 61.0). We believe that the risks might be on the upside of expectations as all regional business confidence indicators surprised on the upside too, despite the Richmond Fed index. In the euro zone, the final reading of March Manufacturing PMI is expected to confirm that sentiment weakened slightly. According to the first estimate, euro zone manufacturing PMI fell from 59.0 to 57.7. We have no reasons to distance ourselves from the consensus. Finally also in the UK, manufacturing PMI is forecasted to come off its record high reading from the previous two months. A slight drop from 61.5 to 60.9 is forecasted, but we don't exclude a downward surprise. Regarding markets today, while we put ourselves slightly on the downside of consensus expectations, the major risk, market-wise, might be a real big payrolls number at the time the debate on monetary policy flares up. The market though seems already positioned for a somewhat stronger number. Also the technical pictures for both bonds and currencies merit a heightened alert. For US bonds, the 2-year is close to 0.85% and a strong report would suggest that the consensus economist expectations that the Fed would act before mid 2012 are too conservative.

The picture of the June Note future is bearish, but no key levels are nearby. That is different for the German Bund and yields. A strong payrolls report, combined with the recent upped hawkish ECB talk and the upcoming ECB meeting (where rates will be raised) might push the 2-year yield above the high highs (1.84%), while the Bund is approaching the key 120.92 level. A break would paint a bearish double top on the charts with first target at 119.11. Similarly the 10-year yield might test the 3.50% level.

The technical picture of the main currency crosses is very interesting too. A strong payrolls report might prevent EUR/USD from breaking through major 1.4282 resistance level. Weak payrolls may however be threatening for that resistance level, which if broken paint a double bottom on the charts with theoretical targets at 1.5706 and 1.6690. USD/JPY might profit from a strong report to threaten the 84.51 resistance, which if broken would point to a much stronger pair. Also for EUR/GBP the technical picture is highly interesting. While we don't dare anticipating on sustained breaks of these levels, traders and investors might set up strategies around these levels.

About the Author

Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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Today's Market Outlook

EURUSD

Maintains near-term positive tone after reversal from 1.4247 high found support at 1.4020. Yesterday’s breach of 1.4218, previous high, has so far reached 1.4232, just ahead of 1.4247, 22 Mar lower top, clearance of which is required for fresh attempt at 1.4280, Nov 2010 peak and major trendline resistance. Current correction is consolidating above 1.4150, with further easing not ruled out, and higher low above 1.41 seen to maintain bulls. Loss of 1.41, however, will delay and re-expose 1.4050/20 for test.

Res: 1.4176, 1.4200, 1.4232, 1.4247
Sup: 1.4152, 1.4115, 1.4090, 1.4050

GBPUSD

Upside failure to sustain gains above strong resistance at 1.6140 has triggered sharp reversal under 1.61 to reach 1.6015, just above 1.6010 higher low. Recovery attempt is seen capped by 1.61 zone, with break here and key near-term barrier at 1.6150 to signal recovery under-way. Otherwise, fresh weakness through 1.6015/10 will re-focus 1.5942/35.

Res: 1.6083, 1.6095, 1.6127, 1.6149
Sup: 1.6015, 1.6010, 1.5978, 1.5942

USDJPY

Reversal from 83.20, yesterday’s high, was contained at 82.55, where fresh strength has emerged. Clearance of 83.20/29 barriers and important 200 day MA at 83.62, has so far reached 83.73, just ahead of 83.96, 16 Feb high, break of which is needed to open 84.49, key short-term resistance. Positive near-term studies see scope for further gains, with 82.75/55 expected to contain corrective dips on overbought conditions, to keep immediate bulls in play

Res: 83.20, 83.29, 83.52, 83.96
Sup: 82.55, 82.35, 82.00, 81.50

USDCHF

Correction from 0.9273 spike high exceeded 0.9138/30, 29 Mar higher low/38.2% Fibonacci retracement of 0.8900/1.9273 ascend, to find temporary support at 0.9125. Break above 0.92 barrier keeps positive near-term tone for further gains, with regain of 0.9273 required to resume short-term recovery from 0.8900, towards key short-term barrier at 0.9367. On the downside, loss of 0.9125/00 weakens the tone.

Res: 0.9215, 0.9232, 0.9273, 0.9310
Sup: 0.9185, 0.9125, 0.9089, 0.9073

About the Author

Windsor Brokers Ltd

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 82.43; (P) 82.81; (R1) 83.25

Intraday bias in USD/JPY remains neutral and some more consolidations could be seen below 83.20 temporary top. But break of 80.50 support is needed to signal short term topping. Otherwise, outlook will remains cautiously bullish and we'd continue to favor further rally. Above 83.20 will target 84.49 key resistance next.

In the bigger picture, with 84.49 resistance intact, there is no confirmation of trend reversal yet and the multi-decade down trend in USD/JPY could still be in progress for a new low below 76.40. However, note that decisive break of 84.49 will argue that an important medium term bottom is formed. Focus will then turn to whether USD/JPY could sustain above 55 weeks EMA (now at 85.22). In that case, stronger rise could be seen towards 94.97 resistance and above.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6006; (P) 1.6044; (R1) 1.6111;

GBP/USD's sharp reversal after hitting 1.6140 minor resistance revives the original bearish view that fall from 1.6400 is not over. Break of 1.5935 will target medium term trend line support (now at 1.5811). Sustained break there will indicate that whole rise form 1.4230 has finished too and will turn outlook bearish for 1.5343 support. On the upside, however, above 1.6149 will dampen this immediate bearish case again and turn focus back to 1.6400 high instead.

In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4230 is treated as the third leg of such consolidation and with 1.5343 support intact, such rise could still continue for 1.7043 resistance. But after all, strong resistance should be seen between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside. On the downside, break of 1.4230 support will be the first signal of down trend resumption and will turn focus to 1.3503 low for confirmation.

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USD/CAD Daily Outlook

USDCAD Outlook | Written by ActionForex.com | Mar 09 11 07:54 GMT

Daily Pivots: (S1) 0.9698; (P) 0.9722; (R1) 0.9738; More.

Consolidation from 0.9683 is still in progress and intraday bias remains neutral. Even in case of another recovery, upside is expected to be limited by 0.9836 support turned resistance and bring fall resumption. Below 0.9683 will target 161.8% projection of 1.0851 to 1.0138 from 1.0671 at 0.9517 next. Nevertheless, above 0.9836 will dampen this view and bring stronger rebound back to parity instead.

In the bigger picture, whole medium term fall from 1.3063 (2009 high) is still in progress and such down trend could possibly extend further towards 2007 low of 0.9056. Nevertheless, fall from 1.3063 is still looking corrective and hence, we'd expect strong support between 0.9056/9709 to contain downside and bring another medium term rise. Though, break of 1.0851 resistance is needed to confirm medium term reversal. Otherwise, medium term outlook will remain bearish.

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AUD/USD Daily Outlook

AUDUSD Outlook | Written by ActionForex.com | Mar 09 11 07:54 GMT

Daily Pivots: (S1) 1.0056; (P) 1.0095; (R1) 1.0136; More

No change in AUD/USD's outlook. While upside momentum is clearly seen diminishing with bearish divergence condition in daily MACD, AUD/USD is still drawing strong support from 55 days EMA. Recent up trend is still in favor to continue further. Break of 1.0200 again will target another high above 1.0254. On the downside, break of 0.9943 support is needed to be the first signal of topping. Otherwise, we won't turn bearish yet.

In the bigger picture, note that bearish divergence condition remains in daily and weekly MACD. Reversal should be imminent even if 1.0254 is not yet the major top. We'll continue to look for topping signal in case of another rise. On the downside break of 0.9803 support will now be an early signal of medium term reversal and will turn focus to 0.9536 support for confirmation.

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EUR/USD Daily Outlook

EURUSD Outlook | Written by ActionForex.com | Mar 09 11 07:51 GMT

Daily Pivots: (S1) 1.3848; (P) 1.3918 (R1) 1.3975; More.

EUR/USD's retreat from 1.4035 is still in progress and deeper fall might be seen. But still, strong support should be seen from near term rising trend line (now at 1.3804) to contain downside and bring another rise. Break of 1.4035 will bring rally resumption towards 1.4281 key resistance next. However, sustained trading below the trend line support will argue that whole rebound from 1.2873 is possibly completed and will bring deeper decline to 1.3472 support instead.

In the bigger picture, as long as 1.3427 support holds, we'd favor the case that rise from 1.2873 is extending rebound from 1.1875. Also, that would mean that we're favoring the case that medium term correction 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. Break of 1.4281 resistance will further affirm this case and target 1.5143 resistance and then 1.6039 high. However, break of 1.3472 will leave the whole rise from 1.2873 in three wave corrective structure, which in turn indicate that fall from 1.4281 is not finished and will turn favors back to the bearish case for at least a test on 1.2873 support.

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How Long Can USD Keep Head of Steam?

The USD followed through on its smart little technical reversal yesterday with follow-up strength today, but will the currency follow through to the strong side here, or is this simply another modest consolidation that will fade to yield further gains for the greenback like all previous attempts by the currency to make a stand?

UK BRC Sales

The UK Like-for-Like sales number for February were very weak (though overall sales did rise +1.1% YoY) and suggests rather weak end demand from consumer. This makes sense in light of the austerity descending on the British population since the first of the year. The weak demand wasn't as evident in January due to pent up demand from historically disruptive winter weather that kept people pinned up in their homes in December. Continued weak demand will be an interesting possible theme for the UK in coming months.

Riksbank

The Swedish Krona caught a bit of a bid today despite generally souring risk markets and despite dovish talk from the Riksbank Deputy Governor Svensson. He was out arguing for a “lower repo rate path” and for a focus on employment as well as inflation. Sounds like Mr. Svensson needs to join the Bernanke Fed. Another Riksbank member is out speaking later today.

Chart: EURUSD

EURUSD is reversing after its extensive grind higher all the way from the . So far, we can only speak of an orderly consolidation. The key is whether the sell-off cuts deeply through the 1.3860 area support provided by the previous high, a move that would weaken the uptrend. Note that the recent test above 1.40 just barely took out a falling trendline - a tease that proved a false break. Round numbers have often been important in EURUSD's history and that 1.40 level remains the key upside resistance for now as we inch close to the EU summit later this month.

Chart: AUDUSD

The technical situation in AUDUSD is becoming a farce, with an ever-shrinking range between 1.02 and higher and higher lows. The nominal technical formation is an ascending triangle, normally considered a bullish formation, but the longer the pair dallies, ironically, the weaker the formation becomes as an indicator of future direction. Parity is the key downside support beyond the tactical 1.0075 level.

Chart: AUDNZD

A large scale reversal in AUDNZD, which shows the most significant crack in the uptrend in over a month. This may be the beginning of the end of the uptrend - as valuation here is extreme and there is only so much an earthquake can do to a country's currency. Longer term fair value lies closer to 1.30 if not 1.25 for the pair.

Looking ahead

The USD has followed through a bit stronger today, a development presaged by yesterday's neat technical reversal in key USD crosses. The question now is whether we follow through and move back through more strategic resistance levels for the greenback. To take three USD pairs, that would be on the order of 1.3860 in EURUSD, parity in AUDUSD and 1.6000 in GBPUSD. Certainly from a contrarian perspective, there are grounds for further USD strength as USD shorts are out there in record swarms by some measures. Again (as we discussed yesterday), a continued rally in fixed income (which should tend to favor the USD in interest rate spreads), a easing off of crude oil prices and another couple of percent of downside for equities could prove powerful medicine for the greenback in coming days.

For USDJPY, we await today's 3-year auction with interest. Expectations are relatively low after last month saw a very anemic auction despite relatively high yields (if you can call 1.25% a high yield - but that was higher than the 0.45% the 3-year debt was yielding around the time of Bernanke's official QE2 announcement). The 3-year debt is yielding about the same now as it was at last month's auction - so this will be an interesting one to see whether recent events and disruptions in equity markets see a stronger bid coming into the market.

The rest of the week's calendar is fairly heavy for Australia, with Consumer Confidence and Home loan data tonight, and the employment report tomorrow night. Seems like by this time next week, we are either trading above 1.0200 or below parity.

Economic Data Highlights

• New Zealand Feb. QV House Prices fell -1.7% YoY vs. -1.5% in Jan.
• Japan Jan. Adjusted Current Account Total out at ¥1089B vs. ¥1167B expected and ¥1519B in Dec.
• UK Feb. BRC Like-for-Like Sales out at -0.4% YoY vs. +0.7% expected and +2.3% in Jan.
• UK Feb. RICS House Price Balance out at -26% as expected and vs. -31% in Jan.
• Australia Feb. NAB Business Conditions out at -2 vs. -6 in Jan.
• Australia Feb. NAB Business Confidence out at 14 vs. 4 in Jan.
• Switzerland Feb. Unemployment Rate fell to 3.4% as expected and vs. 3.5% in Jan.
• Germany Jan. Factory Orders rose +2.9% vs. +2.5% expected and -3.6% in Dec.
• US Feb. NFIB Small Business Optimism out at 94.5 vs. 95.0 expected and 94.1 in Jan.
• Canada Feb. Housing Starts out at 181.9k vs. 174k expected and 170.6k in Jan.

Upcoming Economic Calendar Highlights (all times GMT)

• US Fed Nominee Diamond to Testify (1500)
• Sweden Riksbank's Ekholm to Speak (1500)
• US Fed's Krieger to Speak (1620)
• US Weekly API Crude Oil and Product Inventories (2130)
• Australia RBA Assistant Governor Lowe to Speak (2230)
• Australia Mar. Westpac Consumer Confidence (2330)
• Japan Jan. Machine Orders (2350)
• UK Feb. BRC Shop Price Index (0001)
• Australia Jan. Home Loans (0030)

About the Author

Saxobank

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The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time.

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Is AUD Poorly Positioned Heading Forward?

In today's trading we saw the AUD/USD pair fall rather strongly, as the USD strengthened against most of its rivals. However, we have see the pair again rejected at the 1.02 level. For the most part, the pair has been in sideways price action throughout the first two months of 2011 as it has been unable to push above 1.02, though at the same time is have been setting higher lows during the period.

The Aussie has a spectacular run throughout 2010 as its economy was bolstered by strong demand from China for its exports of raw materials including iron ore and coal. It also had a very strong advantage in that the central bank - facing a mining jobs boom - was one of the few central banks from the "developed world" raising interest rates helping to increase the interest rate differential between it and the other major central banks.

While the economy still enjoys strong fundamentals, including an unemployment rate that at 5% is at "full employment" the two factors we described above may wane in helping to sustain the currency and could mean a dip back below the parity level.

First, China is trying to reign in its economy with higher interest rates of its own. Inflation is a large concern as is the chance that Chinese banks have lent out too much credit which could cause a financial crisis. China has raised rates 3 times since October, bringing its benchmark interest rate from 5.31 back in September 2010 to 6.06 in February. More may be needed to cool the economy a sufficient amount to get a handle on inflation. That can mean less industrial production in China and therefore less demand for Australian goods.

We saw exports in Australia for the month of January fall by 4%, though much of that was due to the impact of recent flooding. Still further attempts by China to tighten policy will have an adverse effect on Australian exports, and can cause the AUD some problems.

The Aussie's second reason for strength, its interest rate differential against other developed countries, will also not play as important a role going forward. With the price of Brent Crude oil contracts climbing above $115 it has created a lot of anxiety in central banks that it will fuel inflationary pressure.

That has caused the ECB to telegraph an upcoming interest rate increase, and traders are pricing in a Bank of England increase in the coming months. As global interest rates play catch up, the Reserve Bank of Australia is in a wait-and-see mode as it assesses the pass through of the damage that was caused by the strong flooding and recent cyclone.

Therefore the AUD may lose some of its interest rate advantage. While the US Fed is not close to tightening policy - in addition to the ECB and BOE, we have the Bank of Canada on the cusp of needing to being to raise interest rates. If the AUD falls against the EUR, GBP and CAD those effects will be felt in the AUD/USD pair as well.

Therefore, the factors that could hamper AUD strength are there - higher Chinese interest rates and higher oil prices causing central banks to hike rates. They are not givens, but it looks pretty clear that oil prices will remain elevated for the time being.

If these factors materialize then the Aussie may be poorly positioned heading forward for the next few months. It's worth keeping an eye on them in anticipation of Aussie weakness.

About the Author

FXTimes

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness.

FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

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USDCAD: Struggling To Put In A bottom But Vulnerable

USDCAD: Its bottom forming process continues to play out as USDCAD is still consolidating slightly above the 0.9682 level, its Mar 01'2011 low. In case a recovery higher occurs, we expect it to be capped at the 0.9809 level, its Feb 17'2011 low. This level should reverse roles and provide resistance thus turning the pair back lower in the direction of its long-term weakness. This will see USDCAD attacking its Mar 01'2011 low at 0.9682 with a convincing break of this level extending further weakness towards its psycho level at 0.9600 and then the 0.9500 level. On the upside, if a break of its Mar 02'2011 high at 0.9774 level and the 0.9809 level, its Feb 17'2011 low happen, further upside risk will shape up towards the 0.9958 level, Feb 15'2010 and then the 1.0056 level.

About the Author

Mohammed Isah
Market Analyst
www.fxtechstrategy.com

This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report

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Today's Market Outlook

Daily Forex Technicals | Written by Windsor Brokers Ltd | Mar 03 11 08:32 GMT

EURUSD

Yesterday's fresh strength from 1.3742 higher low has finally cleared 1.3860 resistance and spiked to 1.3889, ahead of shallow correction to 1.3860 zone, former resistance and now reverted to support. While the latter holds dips, immediate target lies at 1.3947, 76.4% Fibonacci retracement of 1.4280/1.2872 downleg, ahead of psychological barrier at 1.40. Further correction on overbought hourly conditions would target 1.3835/15, Fibonacci levels, while 1.38 marks key near-term support and needs to hold to keep near-term bullish outlook intact.

Res: 1.3874, 1.3889, 1.3900, 1.3947
Sup: 1.3845, 1.3803, 1.3780, 1.3742

GBPUSD

Has posted a fresh high at 1.6342 after pullback from double top at 1.6328 reached 1.6215, 38.2% retracement of 1.6030/1.6328 ascend, where good support was found . Hourly studies look somewhat exhausted, but 1.63/1.6270 supports hold for now. Wider picture remains bullish, with scope for fresh extension higher and 1.6456, Jan 2010 high in sight. At the downside, 1.6215 offers key near-term support and should contain corrective dips.

Res: 1.6331, 1.6342, 1.6371, 1.6456
Sup: 1.6300, 1.6271, 1.6245, 1.6215

USDJPY

Remains at the back foot after recovery attempt from 81.61 failed to sustain gains above 82 zone, with fresh weakness extending through 81.61 to test 81.57, trendline drawn off 80.24 low. Bounce from 81.57 is so far capped by 82.00, and clearance of 82.00/23 is needed to improve near-term outlook and signal fresh recovery towards 82.90/83.05 resistance zone. At the downside, loss of 81.57 will focus 81.10/80.92.

Res: 81.91, 82.10, 82.23, 82.31
Sup: 81.76, 81.57, 81.10, 80.92

USDCHF

Extends the latest downleg from 0.9773 high, to post fresh record low at 0.9200, after corrective attempt from 0.9221, previous low, stalled at 0.9320. Overall tone remains bearish, with 0.9100 zone seen next, while 0.9320 expected to limit the upside for now.

Res: 0.9261, 0.9289, 0.9320, 0.9390
Sup: 0.9221, 0.9200, 0.9150, 0.9100

About the Author

Windsor Brokers Ltd

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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EUR/USD Sets New 2011 High Going Into The ECB Meeting

Sunrise Market Commentary

• Global core bonds correct lower
  Global core bonds were under downward pressure virtually from the opening of trading in Europe to the closure in the US. Stronger eco releases in the EU and US didn't provoke immediate reactions. Today, the ECB-meeting and the fol-lowing press conference will be very closely monitored.
• EUR/USD sets new 2011 high going into the ECB meeting
  On Wednesday, the correction in EUR/USD didn't last long as markets expected the ECB to raise its inflation alert which gave the euro additional interest rate support. EUR/USD reached a new 2011 top. Trichet holds the key to decide on a further up-leg of the single currency

The Sunrise Headlines

• US Equities ended slightly up on Wednesday led by gains in energy shares. This morning, most Asian shares trade in positive territory, while Chinese stocks lose some ground on expectations that inflation will rise above 5%.
• The European Central Bank is expected to step-up its anti-inflation rhetoric at the monetary policy meeting today as it may raise its alertness on inflation. Another step in the exit policy is likely, but it might be a small step rather than a giant leap.
• Libyan leader Muammar Gaddafi and the president of the Arab League are considering a peace plan from Venezuela's President Hugo Chavez to end the crisis in the North African country, news agencies reported this morning.
• Bundesbank President Axel Weber has proposed to automatically extend ma-turities of bonds issued by countries that tap Europe's future rescue fund in order to give them breathing room to consolidate their public finances.
• Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for commodities could increasingly reach consumers, the Fed's Beige Book survey showed.
• China's annual inflation is likely to top 5% in the first quarter of 2011, a senior government economist said this morning.
• Brent crude oil prices dropped this morning below $115/barrel on speculation that a peace plan to end the crisis in Libya was under consideration.
• Today, the eco calendar contains the euro zone (final) and UK services PMI, the US non-manufacturing ISM, euro zone retail sales, preliminary estimate of euro zone Q4 GDP and US initial claims. The ECB holds its monthly policy meeting.

Currencies: EUR/USD Sets New 2011 High Going Into The ECB Meeting

EUR/USD

On Wednesday, EUR/USD opened the session on a weaker footing. The pair was seen in the 1.3745 area after a correction on Tuesday evening. Question was whether this was just a technical correction after the rejected test of the 1.3857/62 resistance area (week highs/year high) or whether the euro had again become more sensitive to global risk aversion. The jury is still out on this issue as markets don't really know how to react to higher oil prices. However, at least for now, it looks that the decline on Tuesday evening and yesterday morning was nothing more than a simple correction. In Europe there were only some second tier eco data on the agenda, but the euro soon found again a better bid. EUR/USD traded again in the 1.3840 area around noon in Europe. The dollar tried a moderate comeback going into the ADP labour market report. The report showed a rise in private jobs of 217 000, well above the market consensus. However, there were no follow-through gains of the US currency against the euro. Even more, EUR/USD even set a 'minor' new high for 2011 at 1.3890. The expectation that the ECB will step up its inflation rheto-ric today kept the euro well supported. A further slide on the equity markets and oil holding close to the $115/116 level (Brent) were unable to derail the single currency. The Beige Book, giving input for the March 15 Fed meeting indicated that that overall economic activity continued to expand at a modest to moderate pace in January and early February. However, in general there was no euphoria on the progress in the la-bour market yet. EUR/USD closed the session at 1.3866, compared to 1.3777 on Tuesday

Today, the calendar is extremely busy with several items that have market moving potential. In Europe the (final) services PMI's; the January retails sales and the pre-liminary release (with details) of the EMU Q4 GDP will be published. These data might provide interesting information on the health of the European economy, but in-vestors and traders probably won't adjust positions ahead of the key ECB policy meeting. The ECB press conference will be a key factor for investors to decide whether there is enough reason to push EUR/USD for an further up-leg beyond the 1.3862 resistance which is showing serious cracks. We expect Trichet to hold a hawkish tone (for an in debt analysis of the ECB policy decision see our KBC flash report and the bond part of this report). Of course, interest rate markets have already priced in the rising chance of an ECB rate hike mid this year. Nevertheless, the ECB indicating that inflation risks have moved to the upside and/or the Bank raising its 2012 inflation forecast above 2.0% would be a strong sign that an early ECB rate hike is highly probable. Such a scenario might pull the trigger for another up-leg in EUR/USD. The US initial jobless claims and the ISM of the non-manufacturing sector are interesting from an economic point of view. However, with the Fed giving no indi-cation at all that it intends to change its assessment/tactics anytime soon, the relevance of these data for markets should be limited after all. As was the case over the previous two weeks, oil and the tension in the MENA countries will continue to play a role on the background. However, we expect the ECB to be the decisive factor for EUR/USD trading today.

Looking at the technical charts, EUR/USD yesterday moved already (temporary?) above the 1.3862 resistance and the test is ongoing. Of late, we advocated that a sustained break above this 1.3862 resistance wouldn't be easy. Over the previous days, our working hypothesis was under heavy pressure. If the euro would get addi-tional interest rate support after the ECB press conference, we will have to adapt our strategy as it would open the way for a retest of the November high (1.4282).

EUR/USD: setting new 2011 top ahead of the ECB meeting.

Support comes in at 1.3827/08 (break-up hourly/ STMA + Daily envelope), at 1.3730/12 (Daily flag bottom)/MTMA +reaction low), 1.3694 (Broken daily down-trend line) and at 1.3641 (LTMA).

Resistance stands 1.3890/96 (Reaction high hourly/Daily Boll top), at 1.3932/47 (Daily Flag top/76% retracement since 1.4283) and at 1.4010 (2nd target double bottom).

The pair is in overbought terri-tory.

USD/JPY

On Wednesday, the USD/JPY cross rate showed some intraday swings but at the end of the session the difference with Tuesday's close was again very limited. USD/JPY tried to regain the 82.00 mark early in Europe and after the publication of the stronger than expected ADP labour market report. However, the dollar remained under pressure across the board as higher oil prices and declining interest rate sup-port weighed on the US currency. USD/JPY reached an intraday low at 81.57. Of course, the higher oil price is also not a present for the Japanese economy and for the yen. So, traders didn't really know which way to go. USD/JPY regained the ear-lier losses. The pair closed the day at 81.87, almost unchanged from the 81.86 close on Tuesday.

This morning, Q4 capital spending data in Japan were reported below market con-sensus. This might have negative implications for the revision of the Q4 GDP. Asian stocks are mostly in positive territory (except for China). At the moment of writing, the oil price shows some tentative signs of topping out. It is not yet clear whether this move will have strong legs. However, if US bond yields would move higher (in case of easing tensions in the Middle East or for another reason), this might give USD/JPY downside protection.

Recently we favoured range trading in the 81.00/84.50 sideways pattern. Early February, a correction bottomed out in the low 81.00 area and the cross rate reached a correction high just below 84.00 mid-February. However, the rebound did run out of steam as the rise in US interest rates slowed. An unexpectedly sharp rise in US bond yields will probably be needed to push USD/JPY beyond this range top. However, of late, US data were unable to inspire such a move. So, we expect the above men-tioned range to hold for now. Last week, USD/JPY made a setback due to declining interest rate support for the US dollar and as the yen profited from safe haven flows.

In a day-to-day perspective, the pair is still within striking distance of the 81.10/80.93 support area. We continue to doubt that risk aversion originated by tensions in the Middle East should be a lasting support for the yen. So, for now, we assume that the 81.10/80.93 range bottom will hold.

USD/JPY: capped by higher oil prices

Support is seen at 81.57 (week low), at 81.43 (Broken daily downtrend line), at 81.24/10 (Daily Boll bottom/Reaction low), at 81.93 (year low) and at 80.54/21 (Nov Low/2010 low)

Resistance comes in at 82.14/24 (Daily envelope/Week high), at 82.45/53 (LTMA/MTMA), at 82.67 (Weekly envelope) and at 83.01 (Breakdown daily).

The pair is in oversold territory

EURGBP

On Wednesday, there was again no big story to tell on EUR/GBP trading. The cross rate reached an intraday low at 84.64 after the publication of a better than expected PMI of the UK construction sector. However, the week low at 0.8460 held. Later in the session, EUR/GBP joined the rebound in EUR/USD and filled offers just above 0.8500 late in Europe/at noon in the US. The pair closed session at 0.8493 (com-pared to 0.8469 on Tuesday).

This morning the Hometrack housing survey came out at -0.2%M/M and -2.7% Y/Y. EUR/GBP tries to extend gains above the 0.8500 mark. Later today, sterling traders will keep an eye at the UK PMI of the services sector. A moderate decline from 54.5 to 53.7 is expected. However, the euro side of the story will prevail today. ECB's Trichet bringing a hawkish message at the press conference might also support this euro cross rate.

In a longer term perspective, we expect a bumpy road for the UK economy in 2011. The BoE faces a big policy dilemma. Inflation remains much too high, but the real economy will most probably require ongoing policy support. Since early January, the pair moved up and down within a range of 0.8285 and 0.8672. In the first halve of February, investors started taking into account the scenario of an early UK rate hike. This supported sterling. At the same time, the euro ceded some ground as Trichet didn't step up his inflation rhetoric at the February meeting. In the February inflation report, the BoE saw rising upside inflation risks. However, BoE governor King was less committed to a rate hike than a lot of investors had anticipated. So, there was a window of opportunity to take profit on sterling long positions. From here, we expect some consolidation in EUR/GBP. The downside in this pair has become better pro-tected. Hawkish ECB talk might continue to support this process. A first important support is coming at around 0.8355/60, while 0.8285 is the key point of reference. We expect this level to be tough to break without high profile news. The day-to-day overall euro gains might cause EUR/GBP to try to regain the 0.8529 neckline.

EUR/GBP: slightly higher on overall euro strength

Support comes in at 0.8483 (Re-action low + LTMA), at 0.8461/60 (Reaction low + MTMA/Daily Boll Midline), at 0.8445 (Break-up daily + daily envelope), at 0.8429/22 (Weekly enve-lope/reaction low hourly) and at 0.8406 (Break-up hourly).

Resistance is seen at 0.8504 (STMA), at 0.8518 (Breakdown hourly), at 0.8549/54 (Daily Boll top/Reaction high) and at 0.8688/94 (daily downtrend line/Weekly envelope + Reaction high).

The pair is in neutral territory.

News

US: ADP employment report remains strong in February

The ADP employment report showed another decent gain in private employment. In February, private employment increased by 217 000, according to the ADP report, while the consensus was looking for an increase by 180 000. The previous figure was slightly upwardly revised to 189 000 (from 187 000). Looking at the details, the service providing sector added 202 000 jobs (from 166 000) and employment rose by 15 000 in goods-producing (from 23 000); of which 20 000 in manufacturing (from 24 000). Employment rose the most in medium (104 000) and small (100 000) size firms, while large firms added only 13 000 workers. The ADP report incorporates the claims data which fell from 447 000 in the week ended January 8 to 385 000 in the week ended February 7, which might be partially explain the strong ADP data. Nevertheless, the ADP report is less pre-cise at capturing payrolls changes at large firms, possibly because they process their own payrolls. This outcome provides further evidence that the US labour market is improving, but we are still looking for confirmation of the official BLS payrolls re-port, which was lagging in the previous months and remained weak. For February, we hope to see some improvement in the BLS report too, partially due to a weather-related rebound.

EMU: PPI jumps at fastest pace since 1982

Euro zone PPI inflation surprised on the upside of expectations in January. On a monthly basis, inflation rose by 1.5% M/M to an annual level of 6.1% Y/Y, significantly above the expected 5.7% Y/Y level. This was the highest monthly jump since 1982, while the annual. The details show that inflationary pressures were led by energy (3.2% M/M), but also prices of intermediate goods (1.5% M/M), non-durable consumer goods (0.4% M/M), durable consumer goods (0.2% M/M) and capital goods (0.2% M/M) rose in Janu-ary. Excluding energy, PPI rose by 0.8% M/M. Although the data are rather outdated, they confirm that price pressures are rising sharply led by higher energy prices

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Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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ECB Dilemma, Euro Peripherals Vs. Inflation

Daily Forex Fundamentals | Written by Saxo Bank | Mar 03 11 09:08 GMT

The ECB rate meeting tops the agenda Thursday as markets await the verdict of Trichet; does the ECB fight the inflationary pressures building or does it do what it can to save the peripheral countries of the Euro bloc?

ECB to ramp up hawk speak?

The Euro has been quite resilient throughout the commotion in the Middle East with various ECB members making noises about the untenable trajectory of inflation in the 17-nation region. The markets are preparing themselves for hikes as they are currently pricing in 98.5 bps (or 1%) within the next twelve months. We are still more dovish on this call though the history of the Trichet-led ECB suggests that the central bank is capable of surprise; e.g. the 25bps hike in July 2008 as the world was in (about to enter) a global recession. The question is whether the ECB will focus on the looming inflation threat or the need for low rates in various Eurozone countries, the peripherals in particular.

The recent data points to even higher inflation in the near term as commodity price gains ripple through the Eurozone econonmy. The CPI flash report suggests inflation of 2.4 percent in February on a year-on-year basis while yesterday's ´report on producer prices showed a jump in inflation there to 6.1 percent in January from 5.3 percent in December.

Today's ECB meeting also provides the council with new forecasts from the staff of economists where the new forecast of inflation is of course key at the moment.

European data today

The ECB meeting is the high point, but the revised GDP report for the fourth quarter or 2010, in which we wil have new information of the components that make up the GDP aggregate, and retail sales, will also be interesting. In particular retail sales may surprise consensus to the upside (we look for 0.6 percent month-on-month vs. a consensus forecast of 0.3 percent) as Germany was out with much better retail sales this morning. Sales at the retail level in Germany jumped 1.4 percent month-on-month in January against expectations of 0.5 percent while December's 0.3 percent decline was changed into a 0.3 percent gain.

Equity Kickoff: US employment data sparked optimism among investors

European stocks will open flat to slightly higher as Wednesday's U.S. employment data showed an improving labour market. Stocks will probably range trade ahead of Friday's non-farm figures unless we see significant changes in Eurozone GDP or retail sales.

The FTSE 100 index futures are unchanged ahead of the opening. Today's economic figures are centred around Eurozone gross domestic product and retail sales (both at 10:00 GMT). Eurozone GDP is expected to come in unchanged quarter-over-quarter from the previous period and retails sales is expected to show a 0.3 percent increase month-over-month. With Brent crude oil prices also slightly lower than USD 115 per barrel, stocks might find some support in today's session despite the continuous tensions in the Middle East.

Yesterday, the S&P 500 index rose 0.2 percent as the ADP employment change in February came in higher than expected at 217K and showed a healthy improvement, ahead of Friday's non-farm figures, and compared to the revised 189K figure for January. The initial reaction to the data was modest in the futures market but as the market opened, the ADP employment figures gave fuel to the gains in U.S. stock indices. An interestingly underlying signal in the ADP report was that small and medium sized businesses hired aggressively in February, which is good news for the U.S. economy. The Federal Reserve's Beige Book also confirmed an improving U.S. labour market but added at the same time that companies are reporting greater ability to pass on rising input costs to consumers and this could signal inflationary pressures going forward, noted the Fed.

Saxobank
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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Apr 27 10 04:07 GMT |

The euro remained under pressure yesterday, as concerns about the Greek economic situation intensified, particularly on conditions that may be attached to the IMF-EU bailout package. €/£ fell to a 3-month low of 0.8607, with sterling also shaking off last week's weak first estimate of Q1 GDP and ongoing concerns about a hung parliament. Ahead today, the key data releases are the UK CBI distributive trades, BBA loans and US Conf. Board consumer confidence surveys. We expect the CBI survey's reported sales balance to have fallen to 10 in March, but basically remaining in line with the long-term average. We should get a rise in BBA loans for house purchase. In the US, the Conf. Board consumer confidence index has underperformed the Univ. of Michigan sentiment survey recently and may rise to around 55. Chart: UK confidence among retailers has improved, according to both the CBI and our own in-house surveys Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Germany Proving To Be The Last Hurdle In Greek Bailout Plans

Daily Forex Fundamentals | Written by AC-Markets | Apr 27 10 06:11 GMT |

Market Brief EURJPY weakened 0.2% to 125.51 as the JPY rose against all of its major counterparts and Asian stocks declined as concern about Greece's bailout plan and the effect of tightening measures in China drove investors away from higher-yielding assets and after reports that BOJ may upgrade its 2011 CPI forecast on April 30. Investor sentiment turned bearish after German Chancellor Angela Merkel said she won't release funds for Greece until the nation has a 'sustainable' plan to reduce its deficit. The USDJPY traded near its strongest level in almost three weeks to 93.81, the most since April 6 on speculation the Fed is moving closer to withdrawing stimulus as the US economic recovery gathers momentum. After the market closed, US Senate Republicans blocked Democrats from advancing their plan to overhaul Wall Street regulation, saying they want to force changes before beginning full debate. The NZDJPY fell to 67.53 after trading 68.31, the highest since Jan. 14 and AUDJPY fell to 86.76 after touching 87.77 yesterday, the strongest since Sept. 29, 2008 on concerns the EU aid package for Greece won't keep the deficit crisis from spreading, damping demand for higher-yielding currencies. The AUDJPY also retreated from an 18 month high as Asian stocks dropped. The NZDUSD dropped to 0.7201 after it reached 0.7256, the most since Jan. 20 while AUDUSD traded 0.9251 after German Chancellor Angela Merkel yesterday said she won't release Greek rescue funds until the country shows it's got a 'sustainable, credible' plan to cut its budget deficit. Australia's producer prices index gained 1% in Q1 (prev. -0.4%) as cost of petroleum refining advanced 8.1%, building construction prices gained 0.6% while utilities rose 3.3%. The EURUSD may weaken to less than 1.3000 this year should the Fed start raising interest rates before the ECB, according to market estimates. If the Fed does hike before the ECB, BOJ and BOE, the USD could become a growth currency again rather than a safe haven suggesting EURUSD and GBPUSD remain at risk in 2010 of falling well below estimated targets of 1.3000 and 1.4800. The FOMC will probably hold its target rate at a range of zero to 0.25% on April 28. USDKRW strengthened 0.5% to 1,103.80 to a 19-month high before a report forecast to show the nation's GDP expanded 7.5% in Q1 annualized, the most since Q4 2002. Yuan forwards climbed 0.1% to 6.6065, reflecting speculation that China's currency will strengthen 3.3% and it's expected that the government will allow it to gain this year with a 5% revaluation narrowing the US trade deficit with China by $61 billion. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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