Forex Trading

The Euro and the British Pound consolidated in narrow ranges in overnight trading after an unexpectedly dovish statement from the US Federal Reserve triggered a US Dollar selloff, pushing EURUSD and GBPUSD sharply higher. Switzerland’s Trade Balance and ZEW survey of investor confidence are on tap in European hours.

Key Overnight Developments

• Australian Annual Car Sales Lowest in 7 Years
• Japan May Inject Capital into Failing Companies, Says LDP Chief
• Euro, British Pound Consolidate After FOMC Sparks Rally

Critical Levels



The Euro and the British Pound consolidated in narrow ranges in overnight trading after an unexpectedly dovish statement from the US Federal Reserve triggered a US Dollar selloff, pushing EURUSD and GBPUSD sharply higher.

Related Article: Euro Unlikely To Sustain Gains Against the US Dollar, Selling Opportunity Ahead

Asia Session Highlights



Australian New Motor Vehicle Sales tumbled to a fresh 7-year low, falling -18.6% in the year to February. Passenger vehicle sales fell -3.8% from the previous month while sport utility sales dropped -1.7%. Most alarmingly, the decline was led by a -4.4% drop in the “other vehicles” subset of the data which includes utility transports, vans, and trucks. The negative implications here extend well beyond pointing to sluggish consumer spending, alluding to a sharp slowdown in business activity. This alludes to continued weakness in employment and by extension overall economic growth. Yesterday, a leading index compiled by Westpac Banking Corp predicted Australia is already in recession.

Japan’s government needs to prevent bankruptcies at large companies with injections of public capital said Hiroyuki Hosoda, secretary-general of the LDP party. “Should a big company go bankrupt, 10,000 people could lose their jobs,” Hasoda cautioned, “Preventing that is our top priority.” The LDP is expected to propose new measures to bolster balance sheets before the end of the 2008 fiscal year at the end of this month to prevent a “March crisis” of massive corporate failures.

Euro Session: What to Expect



Switzerland’s annual Trade Balance is likely to see the surplus continue to narrow in February despite a surprising rebound in January’s monthly reading. The month-to-month figure is notoriously volatile and looking at annual trends in trade flows is much more indicative. To that effect, traders saw exports slumped -11.5% in the year to January, the most in at least 9 years, reflecting a slump in overseas demand as the mountain nation’s main trading partners battle with recession. Exports account for over 54% of overall gross domestic product, suggesting the near-term outlook looks decidedly bleak considering the IMF is forecasting the worst global contraction since World War II. Official government forecasts call for the economy to shrink -2.2% through 2009. Dour economics notwithstanding, the ZEW Survey of investor confidence may advance in March, boosted by the aggressively dovish posture of the central bank: policymakers cut interest rates to 0.25%, announced quantitative easing, and said they were prepared to intervene in forex markets to prevent appreciation of the Swiss Franc.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro, British Pound Consolidate Gains After Dovish FOMC Sparks Rally (Euro Open)