Forex Trading

Key Overnight Developments

• RBA Concedes Recession in 2009 But Retains Optimistic Outlook
• Bank of Japan May Expand Current Quantitative Easing Programs

Critical Levels

The Euro oscillated in familiar territory in overnight trading, oscillating in above 1.3350. The British Pound followed suit, trading sideways in a well-defined 100-pip range below 1.5050.

Asia Session Highlights

The Reserve Bank of Australia’s Quarterly Monetary Policy Statement saw policymakers concede that the economy will see the first recession since 1991 this year, with gross output shrinking -1.25% in the 12 months through June. Still, the bank echoed optimism from the last interest rate announcement, saying Australia will perform better than most other developed countries amid the current downturn and expressing confidence that existing monetary and fiscal measures will help support demand in the period ahead. To that effect, Glenn Stevens and company asserted that it was “appropriate to make smaller and less frequent adjustments to [interest rates having seen] some signs of stabilization in the world economy."

Minutes from the last policy meeting of the Bank of Japan revealed that policymakers may expand current lending programs to assure credit access for companies. The BOJ cut benchmark interest rates to a mere 0.1% in December and has been actively buying corporate and government bonds from banks to boost those institutions’ capital available for lending. For the time being, members were content to broaden the range of assets that would be acceptable as collateral to further ease access to borrowing. However, Maasaki Shirakawa and company did not rule out “additional measures” if conditions become more severe.

Euro Session: What to Expect



Switzerland’s Unemployment Rate is expected to tick higher in April, rising to a 3-year high at 3.5%. Job losses will trim disposable incomes for those out of work and encourage precautionary saving for those that are still employed, weighing on spending. Private consumption is the largest component of GDP, so turmoil in the labor market is likely to keep a lid on economic growth. The central bank has committed to aggressive monetary stimulus: interest rates stand at just 0.25%, quantitative easing measures are in place, and the policymakers are committed to keep down the value of the Swiss Franc in a bid to prevent deflation. Still, the annual pace of inflation printed in negative territory for the second consecutive month in April and a survey of forecasters conducted by Bloomberg expects the mountain nation’s economy will shrink by 1% this year.

In Germany, the Trade Balance surplus is expected to narrow to 8 billion euro in March, down from 8.7 billion in the previous month. This would amount to a whopping -51.8% drop in trading terms from a year before on as deepening global recession weighed on overseas demand for German manufactured goods. Lackluster sales have seen firms scale back output and lay off workers. Indeed, Industrial Production is likely to have shed -20.9% in the year to March, the most on record. Rising unemployment has weighed on disposable income and trimmed spending, weighing on economic growth and pushing the economy to shrink by a whopping -4.95% in 2009 according to the latest forecasts collected by Bloomberg.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Range-Bound Against Euro, British Pound Ahead of US Jobs Report (Euro Open)