Key News
• Confidence in the European economy unexpectedly rose to a six-year high and unemployment fell to a record, giving the European Central Bank scope to raise interest rates in the 13-nation euro region again. (Bloomberg)
• A U.S. trade official said American businesses are having a hard time operating in China because of trade barriers that remain despite efforts by Beijing to keep WTO commitments. (WSJ)
• Japan got a batch of mostly negative economic news Friday, the most ominous being the first drop in consumer prices in nearly a year, fueling concerns that deflation remains a threat. (Reuters)
• Problems in the U.S. subprime mortgage market should not spread and the main risk remains inflation, top Federal Reserve policy-makers said on Thursday in remarks signaling no interest rate cut soon. (Reuters)
• Key Reports Due (WSJ):
8:30a.m. Feb Personal Income. Expected: +0.3%. Previous: +1.0%.
8:30a.m. Feb Personal Spending. Expected: +0.3%. Previous: +0.5%.
9:45a.m. Mar Chicago PMI. Expected: 50.0. Previous: 47.9.
10:00a.m. End-Mar Reuters/U Of Mich Sentiment Index. Expected: 88.5. Previous: 88.8.
10:00a.m. Feb Construction Spending. Previous: -0.8%.

Quotable

“Nonlinearity means that the act of playing the game has a way of changing the rules.”
   
   James Gleck

FX Trading – How much is in the price?

There seems plenty of market moving data due out in the US today.  It should give us a clue as to whether or not this economy is as bad off as many think.   Are we really on “recession watch?”  Given the price action overnight among the pack, it suggests the dollar may be poised to rock and roll on a surprise. 

We got plenty of “good” fundamental news for the NZ$ and euro overnight, but given the reaction in both currencies, it seems a lot of the good news was already priced in (the good old market discounting mechanism at work for you).  There was more good news on business conditions in New Zealand and we found out that euro-zone business confidence continues to grow, and we actually saw the word France and employment growth in the same sentence.  What’s this world coming to?  Despite this, both the euro and NZ$ are slightly lower against the buck.  That can change quickly, as we all know.

The big mover this morning is the Canadian dollar, as $-CAD sneaks below its intermediate-term low on a daily basis.  Could it suggest some confidence in the US economy?  I say that because some have been suggesting the Canadian dollar’s wagon is ultimately hitched to the US dollar because the US represents such a huge part of Canada’s exports.  We may find the answer to this question as soon as today.

Have a great day and weekend!

Jack Crooks