US Dollar - The release of existing home sales lent the US dollar a solid boost in morning trade as the figure jumped a significantly...

... stronger-than-expected 3.9 percent in February - the sharpest rise in three years - to 6.69M from 6.44M.

Although the figure for January was
revised down to 2.7 percent from 3.0 percent, the markets took the
report as unabashedly bullish for US housing and will likely fuel
further speculation that the sector has bottomed out. The seemingly
cheery data comes as Federal Reserve official Roger Cole admitted a
degree of fault yesterday in the fallout of subprime lenders saying,
"Given what we know now we could have done more, sooner, which may be
a more accurate indicator of the times ahead. Indeed, the existing home
sales report released today is a calculation of contracts that were
signed primarily in December and January, prior to the mid-February
subprime breakdown. Furthermore, building permits - a leading indicator
for the sector fell back 2.5 percent earlier this week. It remains to
be seen whether traders will acknowledge the signs and focus instead on
next weeks calendar chock full of releases. First, new home sales are
predicted to rebound after last months dismal -16.6 percent reading
while durable goods orders are estimated to recover from Januarys drop
of -7.8 percent. PCE Core is predicted to edge even higher, which may
spark concerns that the Fed will be put in the complicated position of
dealing with growing inflation and slowing expansion. The final reading
of Q4 GDP could garner major attention as well, as the markets will
respond swifly to any upward or downward revisions. Manufacturing
indicators should improve, but may still reflect broad pessimism on the
sector with the Richmond Fed predicted to rise to -4 from -10 and
Chicago PMI estimated to hit 49.5 from 47.9. Finally, sentiment reports
in the form of consumer confidence and the University of Michigan survey
are projected to show that optimism in the US is dwindling amidst rising
oil prices, growing inflation, and mounting tensions with Iran.

EURO - A day of mostly second-tier data out of the Europe left the Euro
to trade primarily on the back of bullish US dollar sentiment, leading
the EURUSD pair to edge below the 1.3300 level. The ECBs Euro-zone
current account surplus widened marginally to 2.7B in January from a
downwardly revised 2.0B. However, oil prices were still relatively low
during the month and lowered import values, which will likely rise in
February and March, eroding the balance. Meanwhile, consumer spending in
both France and Italy contracted materially last month, with the French
data showing a decline for the first time in five months while Italian
Retail Sales fell much more than expected, printing at -0.4 percent
the worst in more than two years against forecasts of 0.2 percent.
The persistent weakness in consumer demand stands as a major roadblock
for the robust economic growth amongst the regions producers and
highlights the imbalances still present in the system.Similar to the US
dollar, the Euro will be slammed with a high degree of event risk next
week. M3 money supply is expected to rise to an annual rate of 9.9
percent a 17 year high while the March CPI estimate is predicted to
edge closer to the European Central Banks ceiling of 2 percent.
Furthermore, business and consumer confidence are both estimated to
rise, and combined with the potentially stronger inflationary readings,
speculation may amp up for a more hawkish ECB and additional policy
tightening to 4.00 percent.

British Pound - With little to speak of in regard to economic releases,
the British pound eased towards the 1.9600 figure by the end of the US
session as the greenback ruled the majors. The sole piece of data out of
the UK was car production for the month of February, which dropped 0.2
percent, leaving no impetus for Cable strength. News flow out of the UK
next week wont be very exciting either, as most of the releases will be
second-tier in nature. Nationwide house prices are expected to rise
during the month of March while the annual rate of growth is predicted
to slip to 9.6 percent from 10.2 percent, leaving the markets wondering
if the sector is finally slowing. Meanwhile, the final reading of Q4 GDP
isnt likely to provide many surprises, but any revisions to the
original report could create some wild volatility. Wrapping up next week
will be GfK consumer confidence, which is projected to show sentiment
holding steady at -8.

Japanese Yen - After strengthening through the early morning hours on
encouraging economic data, the Japanese Yen eventually caved to the
greenback as global equities furthered their gains. The Japanese All
Industry Index for January rose in line with expectations at a rate of
0.7 percent led by an increase in demand for services, suggesting that
consumer spending has picked up and may support growth in the world's
second-largest economy. However, the devil is in the details, and retail
trade and overall household spending are both on tap next week, which
should help solidify consensus on the status of the fickle Japanese
consumer. Additionally, Tokyo CPI for March is on deck, and although the
monthly headline and core readings are estimated to rise 0.1 percent,
the annualized figures are forecasted to hold at 0.0 percent, indicating
that the Japanese economy is still teetering on the edge of deflation.
Should CPI fall into the abyss of negative readings, the probabilities
of rate normalization later in the year will be slashed and eliminate
any wind left in Yens sails, leaving major downside potential for the
currency out for the taking.

Commodity Currencies - The Australian and New Zealand dollars held
their ground today, remaining relatively unchanged as the currencies
benefited from their high-yield status. The Canadian dollar fell lower
despite the fact oil pushed above $62/bbl after Iran's seizure of
British naval personnel spurred concern of increased conflict in the
Persian Gulf. Australian data will be thin once again next week, while
Kiwi should benefit from an expected narrowing in the trade deficit and
a forecasted surge in Q4 GDP. Meanwhile, Loonie will be able to look
forward price data at the factory gate, with a predicted rise in
industrial and raw material costs likely to tilt the Bank of Canadas
bias even further to the hawkish side.
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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