US Dollar - The US dollar was higher against the majors today, retracing some losses on yesterday run up to the Federal Reserve announcement....

... Subsequently, the thin schedule lent little for further greenback strength, with the market simply referring to the weeks initial jobless claims and the leading indicators report.


For the month, the leading
index dropped 0.5 compared to consensus estimates of a 0.4 drop.
Surprisingly pessimistic, the index also printed a revised 0.3 percent
lower mark for the previous month. Notably choppy activity riddled the
report, which showed jobless claims and consumer expectations dip
alongside building permits. However, with the consumer goods orders
component lending some support, one can claim that consumer spending
continues to remain a pillar of stability for the worlds largest
economy. Initial jobless claims actually improved on the week, helping
to stabilize the rather overlooked index survey. With nothing but
existing home sales scheduled for tomorrow, dollar proponents will be
looking forward to next weeks testimony by Federal Reserve Chairman Ben
Bernanke. Aside from what is scheduled, including durable goods and
consumer sentiment, the testimony should shake dollar markets up as it
comes just a week after the Federal Open Market Committee meeting.
According to the Joint Economic Committee Chairman Sen. Charles Schumer,
the Federal Reserve policy maker will answer questions regarding the
subprime mortgage market and growth/inflation.

EURO - Other than positive new industrial orders data countering Euro
zone trade balance deficits, traders took to comments issued by the
European Commission in driving the euro lower. According to the report
released earlier in the session, the commission warned against rate
increases by the European Central Bank as growth is expected to slow
sharply on the heels of further hikes. The ongoing tightening of
monetary policy could lead to a sharper then expected slowdown of
investment growth according to the survey. However, the commission did
concede and recognize that inflationary pressures are likely to increase
on the backs of wage hikes and higher oil prices even in the light of a
lower rate of productivity. The notion counters what ECB President
Trichet has been purporting in the last couple of months, a higher rate
of inflation as growth remains historically robust. Although not likely
to curtail any further rate hikes that are expected by the market, the
report does confirm what some have been professing since the beginning
of the year. Subsequently, the news has restrained any further gains in
the euro as the currency spot has topped out just above the 1.3400.
Looking ahead, figures remain light with traders only privy to the
German import price index and French consumer spending figures for the
month of February.

British Pound - The release of UK retail sales sparked a surge in the
British Pound to the 1.9700 level early this morning as the figure hit
the tape at a much stronger-than-expected 1.4 percent for the month of
February a one year high. Additionally, the January release was
revised slightly higher to -1.5 percent from -1.8 percent, boosting the
already-optimistic nature of the report. Meanwhile, the headline CBI
Industrial Trends figure rocketed to a twelve year high of +8 as price
expectations jumped, directly countering BOE dissenter David
Blanchflowers vote to cut rates in light of a surprisingly tepid
January CPI report (which was subsequently followed by a unexpectedly
hot results in February). In the end, with the UK consumer spending at a
steady clip, the manufacturing sector finally making a comeback, and
price pressures failing to ease, the tilt of the BOE will likely remain
hawkish . However, with rates in the UK and US at parity, the GBPUSD
pair could be subject to major bouts of volatility as the markets weigh
the odds of which country will tighten or loosen monetary policy first.


Japanese Yen - Not even a surge in the Japanese trade surplus to 979.6B
from -1.9B could save the Yen today, as the Business Sentiment Indicator
for the manufacturing sector plummeted to a reading of 0.1 from 7.1.
Meanwhile, the reading for BSI All Industries surprisingly slipped to
6.2 from 6.4 against estimates of a rise to 6.5. The reports bode
particularly ill for the Bank of Japans Tankan Q1 survey a known
market mover which is scheduled to be released on April 2. Shifts in
the results of the Tankan survey have closely followed that of the BSI
Large Manufacturing figure since June 2004, and the upcoming release is
unlikely to deviate as Japanese companies start to worry that exports
will lag amidst slowing demand. A disappointing Tankan figure could
bring about further weakness for the Yen and erase nearly all of the
gains made during the unwinding of carry trades witnessed just a few
weeks ago. Without the help of the profitable and optimistic
corporations who have funneled money into the economy via massive
amounts of business investments, the economy will be forced to depend on
the fickle Japanese consumer for economic expansion. As a result, the
BoJ will have little impetus to continue normalizing rates this year as
tightening of monetary policy could increase recessionary risks
dramatically.

Commodity Currencies - The comm dollars were a mixed bunch today as the
high-yielding New Zealand dollar was the sole survivor and beneficiary
of a rise in the NZDJPY cross. On the flip side, a completely empty
economic calendar left the Australian dollar and Canadian dollar at the
whim of the greenback. However, the price action of the respective pairs
were minimal compared to that of the majors, as rallies in commodities
kept Aussie and Loonie supported.Crude oil jumped to more than $61/bbl
as a decline in US gasoline stocks fueled concerns of tight supplies
ahead of the summer driving season. Meanwhile, gold received a boost
from the rise in energy prices, as traders moved to the safe-haven asset
and drove it to a three-week high of $644.20/oz. Gold also benefited
from Wednesday's US Federal Reserve comments indicating a more neutral
monetary policy bias.
Kindest Regards,

Terri Belkas
Forex Capital Markets LLC
New York, NY 10005
Tel (212) 897-7660
Fax (212) 897-7669
Toll Free 888-503-6739
tbelkas@dailyfx.com


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