EUR/USD
The dollar strengthened during European trading on Friday with a short move near 1.3780, but it was possible to maintain the ex-ante and weak back under 1.3620. In contrast, in the previous session, the euro has found additional purchasing support at higher levels and pushed sharply higher to a peak of just over EUR 1.37 before consolidating weaker ahead of Monday's MAS holiday.
The euro was supported by comments from ECB Member Bini Smaghi, who said that the ECB would have to consider an early tightening policy if build inflationary pressures of the world. Markets had downloaded comments expectations of ESF aid following more balanced in its latest monthly interview and Bini-Smaghi's comments triggered some fresh increase speculation, although this impact is likely to be too thin conditions weekend long vacations.
There were further tensions in the Middle East and North Africa, with particular emphasis on Libya, while there were also some protests inside China. The dollar once again failed to draw any safe-haven support from the tensions, but will continue to have the potential profits if there is a steady flow of funds in emerging markets.
Within Germany, the Government suffered a heavy defeat in Hamburg local elections and this will keep the pressure on Albania to take a tough stance on the eurozone debt and bailouts. There were emergency financing facility on Friday for the second day running increased borrowing by the ECB. There were also reports that this may have been associated with solution downwards of two Irish banks, which will reduce the potential effects, but there will still be discomfort over the European banking sector that would pose significant risks.
Source: VantagePoint Intermarket analysis software
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Yen
The dollar failed to make any impression on the yen against the Friday resistance over 83.50 and this fell down near 83.00 before finding some support.
G20 meetings did not have a significant market impact with members pledging to address global imbalances, but will not take definitive measures. On Friday, the Chinese Central Bank increased the commercial bank reserve requirements again with an increase to a record 19 2.5%. The impact on the market again was limited, but is likely to have some impact on defense demand Japanese currency.
Any further deterioration in conditions of risk also tends to support the yen, although the effects may be limited at this stage. Confidence in the underlying fundamentals of the Japanese will remain weak which would reduce the purchasing support and the dollar was little changed at trading subdued Monday.
Sterling
Sterling held steady ahead of retail release on Friday and then pushed higher monthly jump 1,9% of sales, even if December was revised to show a decrease of 1.4%. Sterling was unable to maintain an advance against the euro, but did result in a high rate of just over 1.6250 against the dollar as the unit of US remained defensive attitude.
There was a reported 3,1% increase in the House-price Rightmove UK for February, but this action auction values instead of sales prices and were further media reports that prices will decrease during the 2011 as fiscal tightening shall enter into force, mainly as mortgage data remains low. Interest rate speculation continues to be a very important market influence with the minutes of the Bank of England on Wednesday.
Underlying confidence in the economy of the UK is still likely to worsen in the coming weeks, which will provide an important test of Sterling Trust, especially if larger risk appetite has been eroded.
Swiss franc
The EUR advanced strongly to a high near 1.2990 against the franc Friday, but was unable to hold back gains and weakened under 1.2920. The dollar was blocked near 0.9550 and highs near 0.9430 crossover during OUR trading was the lowest level since early February.
Risk appetite conditions will continue to monitor closely and franc will gain some further support if intensify tensions around the Middle East. The Swiss currency is also likely to be regarded as final safe-haven currency, especially with large doubts surrounding the euro and US economies.
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Australian dollar
The Australian dollar has found support directly underneath 1.01 in the u.s. currency on Friday following a further increase of Chinese reserve requirements and pushed for high rate of just over 1.0150, such as the American currency came under greater pressure selling.
The Australian dollar was unable to capitalise on the move and weaker back into local crossover trading on Monday. Underlying risk appetite remained closer that hindered the currency and there will be considerable risks in currency if intensify tensions in emerging markets. There will also be additional risk instability if China needs further monetary steps.
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