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Euro Pushes Past 1.3500 as Business Sentiment Stabilizes

Last updated 3/25/2009 6:19 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Japanese exports plunge a record 49%
• IFO in line at 82.1
• Equities quiet in both Asia and Europe
• Oil remains bid at $53/bbl
• Gold at $927/oz

Overnight Eco

• JPY Trade Balance better at -43T yen vs. -295T eyed but only due to cubing of imports
• EUR German Ifo Business Climate 82.1 vs 82.2
• GBP CBI Realized Sales n/a

Event Risk on Tap

• USD Durable Goods Orders expected at -2.0%
• USD New Home Sales expected at 300K

Price Action

• USD/JPY drops to 97.50 after weak export data
• AUD/USD below 7000 as carry unwinds a bit
• GBP/USD pressured to 1.4600 as high beta currencies consolidate
• EUR/USD pushes past 1.3500 as IFO in line

A slow meandering night of trade in the currency market with most of the majors quietly rangebound throughout Asian and early European trade. The economic data  shed no new light with German IFO printing essentially in line with consensus expectations at 82.1 versus 82.2.

As we noted earlier, “Despite the small uptick in the gauges, the IFO remains mired at its lowest level since the early 1980’s and suggests that at best German business sentiment has simply stabilized but has yet to show any signs of improvement. The news is mildly surprising given the better readings from ZEW and Belgian Business Sentiment reading this month, but it does underscore the severity and intransigence of the global recession affecting the German economy.”

Meanwhile in Japan the Trade numbers printed better than expected but the data was actually much worse than the headline numbers suggested.  The Japanese Trade Balance came in at -43 Trillion yen versus -297 Trillion forecast, but the improvement was due solely to massive cutbacks in imports. Japanese exports collapsed by -49% their worst performance since the early 1980’s. 

Risk to the Yen

The news suggests that Japanese GDP may print its second consecutive quarter of double digit contraction as the economy continues to struggle with the vicious double squeeze of strong yen and shrinking global demand.  Ironically enough yen strengthened on the news as risk aversion fears kicked in unwinding some the large carry trade flows over the past several days.

Looking to North America, the eco calendar carries  the US Durable Goods report which should provide  only  temporary excitement before currencies once again turn their attention to equities. We seem to have settled into state of equilibrium around the 1.3500 level in EUR/USD and unless US markets show some volatility later in the session currencies are likely to remain rangebound for the rest of the day.  

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.