Morning Currency Wrap for Wednesday March 29, 2011

Bla, Bla, Bla, Bla, Bla Its Repeat Monday - The Euro was little changed against the USD as nothing has changed since yesterday, as the propaganda about possible changes to the Fed's monetary policy continues to be spewed by non-voting Fed member, James Bullard. Look the key take away from Bullard's comments are that he is a non-voting member and that there is nothing new in his comments because they don't represent a new view. Furthermore, the notion that the Euro is being weighed down by speculation that Portugal will require a bailout doesn't make sense to me. Well for one thing, if Portugal did get a bailout then wouldn't the Euro go higher? I think it would because the bailout would be the solution to the problem. Also, I don't see the difference between Europe's sovereign debt crisis and the US's debt crisis. Of the 27 euro zone member only Greece and Ireland have required a bailout so far but in the US over 80% of the 50 states have serious debt problems not to mention the debt crisis of the federal government. Look for Eur/USD to remain range bound until Friday's US jobs data. In the UK, the GBP remained near its weakest level in five months against the Euro and near yesterday's level versus the USD after data showed the U.K. economy shrank. GDP fell 0.5% from the previous three months, near an earlier estimate of 0.6 %. This data doesn't change the market's view on UK monetary policy - both the ECB and Bank of England meet next on April 7, where a euro zone interest rate hike is expected but no change is expected for the BOE. Moving over to Asia, the USD continues to gain traction against the Yen as we approach Japan's financial year as the threat of intervention continues to hang over the market thus putting a floor under the Yen and as Japanese equities remain under pressure due to the worsening nuclear situation. Also, front page commentary from the China Securities Journal says that the People's Bank of China is likely to raise interest rates again in April and in the middle of this year to help drag real rates out of negative territory to tackle inflation. In Canada, the CAD remained will bid along with the other dollar block currencies (AUD & NZD) as the risk on trade continues. Comments over the weekend by Bank of Canada Governor Mark Carney that hinted that rate hikes, while not imminent, were on the horizon also kept the CAD well bid.

Here are the interbank mid-market rates at the time of posting:

EUE/USD    1.4063            USD/CHF     0.9210

GBP/USD    1.5974            USD/CAD    0.9778

AUD/USD   1.0217            EUR/CAD     1.3756

NZD/USD    0.7505           GBP/CAD     1.5627       

USD/JPY      82.34            USD/MXN    11.9828