Forex Trading

The Euro may extend New York session losses in European hours with Germany’s IFO Survey of business confidence expected to drop to the lowest level in 26 years in March. Overnight data saw Japan’s exports boosted by the cheaper Yen in February while New Zealand’s consumer confidence fell on rising unemployment in the first quarter.

Key Overnight Developments

• Japan's Merchandise Exports Boosted by Cheaper Yen in February
• NZ Consumer Confidence Lower in Q1 as Unemployment Rises
• Euro Consolidates, British Pound Lower in Overnight Trading

Critical Levels



The Euro consolidated daytime losses in overnight trading, oscillating in a 50-pip range above 1.3445 to the US Dollar. The British Pound trended lower, losing as much as -0.3% against the greenback.

Asia Session Highlights



Japan’s Merchandise Trade Balance printed better than expected February, showing an 82.4 billion yen monthly surplus versus expectations of a -20.0 billion yen deficit. The improvement came as exports gained a modest 1.3% while imports plunged 22.4% from the preceding month. The uptick in overseas sales may have been encouraged by a -7.9% drop in the value of the Japanese Yen through February, making goods cheaper for foreign buyers. We had expected the improvement having noted after manufacturing PMI ticked higher for the first time in six months in the same period.

On balance, the overall trade landscape remains decidedly bleak: the decline in export volumes has nearly doubled that of the drop in imports in the year to February, falling -45.4% versus a -25.5% reduction in outbound shipments. Dwindling overseas sales are set to continuing to push Japanese companies to cut back production capacity, boosting unemployment to put downward pressure on consumption and overall economic growth.

Japan’s annual trade surplus with the US, its chief trading partner, shrank to the lowest in 11 years through 2008. The tightening trade gap implies a net outflow of money from Japan and into the US, putting arguing for long-term upward pressure on the USDPY exchange rate.

New Zealand’s Westpac Consumer Confidence fell to 96.0 through the first quarter, down from 101.3 in the three months to December 2008. Dour sentiment is to be expected considering the unemployment rate stands at a 5-year high of 4.6% and is expected to rise to a whopping 6.4% through 2009. Weak consumer spending will deepen the worst recession that the antipodean nation has seen in 30 years, with fourth-quarter GDP expected to issue the fifth consecutive decline later this week, falling -1.1%.

Euro Session: What to Expect



Germany’s IFO Survey of business sentiment is expected to see the headline figure drop to 82.2 in March, the lowest in over 26 years. That said the Expectations component of the reading designed to forecast economic performance for the forthcoming six months is seen improving to 81.5 from 80.9. The result mirrors current forecasts calling for the economy to return to positive growth in the third quarter of 2009. Still, annual economic growth is set to fall -2.5% this year, the deepest recession since World War II. Overnight index swaps see the market pricing in a full percentage point interest rate cut from the European Central Bank when policymakers meet again on April 2nd.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro Threatened with IFO Business Confidence Set to Fall to Lowest in 26 Years (Euro Open)