Daily Market Review: G-7 Urged To Let Markets Set Currency Rates

Halifax House Price Index (MoM) (GB, 08:00 GMT)

BoE Gov King Speaks (GB, 09:45 GMT)

GDP (QoQ) (EU, 10:00 GMT)

ADP Nonfarm Employment Change (U.S, 13:15 GMT)

Interest Rate Decision + Ivey PMI (Can, 15:00 GMT)

Beige Book (U.S, 19:00 GMT)

The U.S. Treasury Department’s top international official urged Group of Seven economies to avoid targeting exchange rates and let markets set currency levels, calling for full and timely data on the scale of nations’ interventions. “The G-7 pledged that exchange rates should float freely, except in rare circumstances where excess volatility or disorderly movements might warrant cooperation,” Lael Brainard, the undersecretary for international affairs, said at a conference in Washington yesterday.

Australia’s economy expanded in 2012 at the fastest pace in five years as resource investment and exports outweighed subdued manufacturing and construction. Gross domestic product grew 3.6 percent last year, the best performance since a 4.7 percent expansion in 2007, data from the Australian Bureau of Statistics showed.

European Union finance ministers neared an accord on a wide-ranging plan to strengthen bank capital requirements as they wrangled with U.K. Chancellor of the Exchequer George Osborne over proposed curbs to bankers’ bonuses. Other news is that Spain is backsliding on economic reforms, fueling risks for its banking system in the midst of an overhaul that faces “significant challenges,” the European Commission said. “Progress in delivering of some key product and services market reforms has been slow,” the Brussels-based commission said yesterday in its second review of Spain’s bank rescue program.

EUR/USD: The EUR/USD was trading slightly higher at 1.30614 at the time of writing after U.S. service-sector data defied negative expectations and fueled a rally in equities markets, which could be serving as a sign that traders are renewing risk appetite. However, investors should remain prudent on the pair and adopt a wait and see strategy ahead of the euro area’s gross domestic product, which probably fell 0.6 percent in the fourth quarter from the previous three-month period, according to the median estimate of economists surveyed by Bloomberg. The European Commission sees inflation at 1.8 percent this year and 1.5 percent in 2014. Peter Dragicevich, a Syndey-based currency economist at Commonwealth Bank of Australia (CBA) said that since the ECB’s last economic forecast in December, the euro has appreciated, so that could weigh on their outlook for inflation and the market may look to price in more ECB policy easing.

That probably could weigh on the euro into week’s end. Later in the day, in the U.S a report on ADP Nonfarm Employment Change forecast to show companies added positions. Firms added 170,000 positions in February, following a 192,000 increase the previous month, economists forecast in a Bloomberg News survey. In addition, the Federal Reserve will release its Beige Book report. The report will indicate the current economic conditions in each of the 12 Federal districts in the U.S. A higher than expected reading of the ADP Nonfarm Employment Change and positive outlook from the beige book should be taken as bullish for the USD. Market participant should closely monitor all the data set to release to today to get visibility on the pair. The resistance level is at 1.31637 and the support level is at 1.29670.
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USD/CAD: The USD/CAD was trading lower at 1.02580 at the time of writing ahead of some very important data in both Canada and the US. Today, Canada will release its Interest Rate Decision. Bank of Canada Governor Mark Carney may water down his intention to raise interest rates today amid economic growth that has lagged forecasts. Canada’s benchmark overnight rate will remain 1 percent, according to all 22 economists surveyed by Bloomberg News. Market sentiment remain fragile on the CAD after Statistics Canada said March 1 that output expanded at a 0.6 percent annualized pace in the fourth quarter, slower than Carney’s 1 percent January forecast. The 0.5 percent inflation rate seen in January remains well below his 2 percent target, and employment fell for the first time in six months that month.

The country will also release its Ivey PMI, which is expected to come at 58.0 compared to 58.9 recorded previously. Later in the day, in the U.S a report on ADP Nonfarm Employment Change forecast to show companies added positions. Firms added 170,000 positions in February, following a 192,000 increase the previous month, economists forecast in a Bloomberg News survey. In addition, the Federal Reserve will release its Beige Book report. The report will indicate the current economic conditions in each of the 12 Federal districts in the U.S. A higher than expected reading of the ADP Nonfarm Employment Change and positive outlook from the beige book should be taken as bullish for the USD. Investors should adopt a wait and see strategy on the pair. Moreover, investors should monitor data in the Eurozone, as they will affect market sentiments for risky assets. The resistance level is at 1.02922 and the support level is at 1.02135.
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Gold: Gold climbed for a second day as physical demand picked up and investors weighed the continuation of stimulus measures by central banks against improving economic data. The yellow metal was trading higher at 1578.440 at the time of writing but trading seems sticky as investors are waiting for some news and data to get more visibility on the commodity. Market sentiments remain fragile as European Central Bank policy makers meet tomorrow after President Mario Draghi signaled last month the bank has no intention of tightening monetary policy anytime soon. China yesterday pledged to support economic expansion while maintaining its growth target at 7.5 percent for this year. Data yesterday showed service industries in the U.S. expanded in February at the fastest pace in a year as Federal Reserve policy makers remain divided on the pace of stimulus. Events likely to affect the trend of the commodity today are the euro area’s gross domestic product, which probably fell 0.6 percent in the fourth quarter from the previous three-month period, according to the median estimate of economists surveyed by Bloomberg. The ADP Nonfarm Employment Change in the U.S, which is forecast to show companies added positions and the Federal Reserve will release its Beige Book report. Investors should also watch the trend of the USD as gold and USD often trade inversely to one another. The resistance level is at 1587.691 and the support level is at 1564.466.