Daily Forex News March 5th 2013

Daily Forex News March 5th 2013
FCTOFX: The Australian dollar rebounded strongly today on better than
expected retail sales and buying continues after the Reserve Bank of
Australia's rate decision. Sales rose 0.9% month on month in January
compared to expectation of 0.4% month on month. The Reserve Bank of
Australia left rates unchanged at 3% as widely expected. In the
accompanying statement, governor Stevens noted that inflation will be
"consistent with target" and growth "a little below trend" over the coming
year. And the current accomodative monetary policy stance is "appropriate".
He said that there are signs that prior rates cuts are having some of the
expected effects but exchange rates remain higher than expected.
Nonetheless, Stevens also noted that with the current inflation outlook,
there is scope for further policy easing if necessary. AUD/USD is back above
the 1.02 level after a dip to 1.0115 yesterday and breached the 1.0148
support briefly. While the downside momentum remains unconvincing, with
the 1.0289 resistance intact: a further decline is still expected in the pair.
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European Union Economic and Monetary Affairs Commissioner Rehn said
that Ireland and Portugal could be given more time to repay the bailout loans
to ease their exit from the bailout program and return to markets Rehn
noted that troika will "continue to examine an appropriate and credible
extension of the maturities on the early European Financial Stability Facility
and Mechanism loans, with a view to smoothing the path back to durable
market access". The Dutch Finance Minister hailed that both countries'
programs are "on track" and "performing well" in spite of the challenging
macroeconomic situation. Meanwhile, Rehn also said that the current
situation in the Eurozone "may also justify in a certain number of cases:
reviewing deadlines for the correction of excessive deficits,"


A major German Newspaper reported that some European Central Bank
members were worried about the central bank's participation in the
Eurozone rescue efforts as this might create a conflict of interest and
compromise its independence. The newspaper cited that "the level of
discomfort has reached such a level that there are considerations among
some important members of the ECB to leave the troika entirely". Yet, ECB
board member Asmussen commented that the ECB would not leave the
troika and stressed that the members "don't see any threat to our
independence while we are participating in the troika". Asmussen stated that
"the ECB participation in the troika is key. as they have great knowledge
about Europe, its institutions, its economy and they especially provide
expertise on macroeconomic and financial sector issues. He reiterated: We
will not withdraw from the troika".


In the US, The DOW Jones was supported by expectation of a continuation of
policy easing from the Fed and closed at a five year high. Fed Vice chairman
Yellen warned yesterday that "insufficiently forceful action to achieve our
dual mandate also entails costs and risks." And she still saw the balance of
risks "calling for highly accommodative monetary policy to support a
stronger recovery and more rapid growth in employment." And, "ending
asset purchases before observing a substantial improvement in the labor
market might also create expectations that the amount of accommodation
provided would not be sufficient to sustain the improvement in the
economy." She also down played the risk of quantitative easing and said
"there is no evidence that the Federal Reserve's purchases have impaired the
functioning of financial markets." Meanwhile, she also noted that the Fed
"would not consider selling assets off until after the federal funds rate is
increased."


In Japan the Bank of Japan deputy governor nominee said that the bank
should buy bonds maturing up to five years and longer compared to the
current up to three years bonds. Meanwhile, he said that revision to law
might be needed for it to achieve the 2% inflation target easier. Though he
emphasized that the bank of Japan should be explicitly given the freedom to
choose how it will meet the inflation target. The comments triggered some
criticism as an opposition Democrat lawmaker said he couldn't support this
because of the intention to revise the Bank of Japan laws that could risk
hurting the central bank's independence.


Looking ahead, services data will be the main focus today. The Eurozone will
release the finalized Purchasing Managers' Index services reading and retail
sales. UK Purchasing Managers' Index services will be the major release in
the European session and is expected to be unchanged at 51.5 in February.
And in the US the Institute for Supply Management non-manufacturing is
expected to drop slightly to 55.0 in February.


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Daily Forex News March 5th 2013

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Daily Forex News March 5th 2013