Sterling at Important Resistance

* The dollar gained against the yen but fell versus most other key currencies on Monday. The USD and JPY pared losses against the European and commodity currencies as stocks consolidated gains. US industrial production declined for a fourth straight month. The EUR/USD rose and tested the 1.30-area resistance on better risk appetite and optimism on the outlook for the financial system. Federal Reserve Chairman Ben S. Bernanke indicated over the weekend that the US recession will probably end this year if the government’s financial-rescue plan is implemented. The currencies tracking US equity movements pared gains as US stocks closed lower. The USD/CAD was little changed, finding support on the diagonal support. The Canadian economy deteriorates further, with Q4 2008 capacity utilization falling to the lowest since 1987. The Australian dollar rose for a fifth consecutive day on better risk appetite.

* The GBP/USD reached its highest level in more than a week following better financial-sector outlook. Barclays Plc reported a “strong start” to 2009, spurring gains in the banking sector. The pair was also boosted as the G- 20 vowed to work together to clean up the toxic assets that led to huge losses for UK and international banks. The GBP/USD is in a downward sloping trading channel. There are support in the 1.35-area and the resistance from the upper trading band in the 1.42-area. If the resistance is broken, the pair will test the important resistance from the long-term downtrend in the 1.44-1.45 area.



www.cmsfx.com

Financial and Economic News and Comments

US & Canada

* US industrial production fell for a fourth consecutive month in February, declining a slightly more-thanexpected 1.4% m/m, to 99.7, its lowest level since April 2002, following January’s downwardly revised 1.9% m/m decrease, according to the Federal Reserve. Industrial production fell 11.2% y/y. Overall capacity utilization in February fell more than expected to 70.9%, matching its lowest level since records started in 1967, following January’s downwardly revised 71.9%. Manufacturing production declined 0.7% m/m in February after decreasing 2.7% m/m in January. Manufacturing production dropped 13.2% y/y. Manufacturing capacity utilization declined to 67.4% from January’s 67.9%.

www.cmsfx.com

* US homebuilder confidence held near a record low in March amid a continuing housing slump, with the NAHB/Wells Fargo builder confidence index remaining unchanged at 9, as forecast, compared with a record low of 8 in January, the National Association of Home Builders/Wells Fargo reported.

* New York manufacturing deteriorated at the fastest pace on record in March, with the New York Fed manufacturing index unexpectedly falling to -38.2, the lowest level since records began in 2001, from February’s -34.7, according to the Federal Reserve Bank of New York. However, the manufacturing outlook for the next six months turned optimistic, with the manufacturing outlook index increasing to 3.1, the first positive reading in three months, from -6.6.

* US net long-term TIC flows in January unexpectedly fell to -$43.0 billion from December’s downwardly revised $34.7 billion, data from the Treasury Department showed. Total net TIC flows dropped to -$148.9 billion, following December’s upwardly revised $86.2 billion.

* Canada’s household net worth dropped the most since at least 1990, falling 4.4% in Q4 2008, representing a loss of C$252 billion ($199 billion), as stocks declined, Statistics Canada reported. The stock index dropped 24% in Q4.

* Canadian existing home sales increased 8.6% m/m in February to 28,669 units, the first gain since September, driven by lower mortgage rates and prices, the Canadian Real Estate Association reported. The average resale price declined 9.2% y/y to C$280,343 ($220,699).

* Canada’s capacity utilization fell to 74.7% in Q4 2008, its sixth consecutive decline and the lowest since records began in 1987, following Q3’s upwardly revised 78.1%, Statistics Canada reported. Manufacturing capacity utilization fell to 73.8% from Q3’s 78.8%.

Europe

* Eurozone consumer prices increased 0.4% m/m in February, in line with expectations, after a 0.8% m/m decline in January, Eurostat reported. The consumer-price inflation rate rose slightly to 1.2% y/y in February, as forecast, from a 10-year low of 1.1% y/y in January. The core rate unexpectedly rose to 1.7% y/y from January’s 1.6% y/y.

www.cmsfx.com

* Amid a severe eurozone recession, euro-area employment fell 0.3% q/q in Q4 2008, the second consecutive decline and the largest drop since records began in 1995, following Q3’s 0.1% q/q decline, Eurostat reported. On an annualized basis, employment levels remained unchanged, following Q3’s downwardly revised 0.6% y/y increase.

Asia-Pacific

* Japan’s economy is “worsening rapidly while in a severe situation,” the Cabinet Office said in its March report, adding that “corporate profits are decreasing very substantially.”

* China’s foreign direct investment declined for a fifth month in February on a global economic slump, falling 15.8% y/y to $5.83 billion, following January’s 32.6% y/y drop, the Commerce Ministry said.

FX Strategy Update



©2004-2008 Globicus International, Inc. and Capital Market Services, L.L.C.

Source: Hans Nilsson

16.03.2009