Morning Currency Wrap for Monday April 4, 2011

Men With Mics = Talking Up Your Book - There are no less than 7 central bank meetings and 9 Fed officials scheduled to speak this week, which means they will all be given a microphone and a platform to talk up their books. Talking up your book is a phrase given to financial market professionals who appear on "bubble vision TV" such as CNBC or BNN and recommend storks, bonds, currencies, or positions that they hold so that they can then sell them to the listener and be done with them. That's what all these men will be trying to do this week - the 7 central bankers will try to give their guidance while the 9 Fed officials will continue the verbal jawboning between hawks and doves so that the speculators can't all pile in on one side - so expect currency volatility this week. The most important central bank meeting this week belongs to the European Central Bank on Thursday April 7, which should deliver its first rate hike since 2008. The Euro could be setting up a buy the rumour sell the fact moment, in fact I will switch from long to short in the Euro if during the post ECB press conference ECB President Trichet signals that the next rate hike is not as close as the market expects. In the UK, the GBP was up due to better than expected UK construction data and on news that Vodafone' deal to sell a stake in France's SFR will mean positive currency flows into the GBP from the Euro. In the US, last Friday's speech by William Dudley, president of the New York Federal Reserve Bank poured cold water to the notion that the Fed would end QE2 earlier than expected. Also, the market went ga ga about Friday's US jobs data but when you looked at the more detailed data you would have seen that over half of the jobs created were from the birth death model, which is a statistical guess, thus caution is warranted. Elsewhere, look for the commodity darlings of the currency world, the AUD and CAD, to continue to carve out new highs on the back of monetary policy and global growth. Both central banks will probably hint that they will be switching from neutral to tightening during the week. Also with the risk on trade in full bloom, both currencies will be viewed as a leveraged play on the continued growth of the global economy.

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

EUR/USD    1.4246            USD/CHF     0.9218

GBP/USD    1.6182            USD/CAD    0.9668

AUD/USD   1.0363            EUR/CAD     1.3771

NZD/USD    0.7674           GBP/CAD     1.5646       

USD/JPY      83.95             USD/MXN    11.8415