by Darrell Jobman, Editor-in-Chief TraderPlanet.com
EUR/US$
The dollar traded within similar ranges as on Thursday during Friday with support close to the 1.5840 level against the Euro while the US currency was again blocked below 1.5750.
The final University of Michigan consumer confidence index for March dipped to a 15-year low of 69.5 from a provisional reading of 70.0, maintaining the recent pattern of weak consumer confidence, while the latest consumer spending data was subdued.
There was also a further increase in the inflation expectations index to above the 4.0% level which will cause some concern over medium-term trends within the Federal Reserve. The core PCE price index reading, however, was held to 0.1% in February from 0.3% while the annual increase was unchanged at 2.0% which will provide some shorter-term relief over inflation trends.
The ECB has continued to take a tough stance on inflation in their comments with Weber, for example, stating on Friday that inflation pressures were alarmingly high. The ECB is still keen to maintain a restrictive policy to control inflation. This will continue to provide Euro support unless there is evidence of serious deterioration within the economy.
There will still be the risk of serious internal divisions within the individual economies while Euro Group head Juncker stated that there were signs of a serious slowdown in the Euro-zone. These comments will cause some reservations over Euro buying, especially with fears over more aggressive rhetoric against dollar losses.
Yen
The dollar continued to probe the 100 region against the yen in Asian trading on Friday, but again hit resistance above this level.
The Japanese economic data was weaker than expected with the unemployment rate rising to 3.9% in February from 3.8% the previous month as manufacturing employment dipped while retail spending was pushed higher by higher gasoline prices. Core consumer prices rose 1.0% in the year from 0.8% previously as energy prices continued to rise which will curb consumer spending.
The subdued domestic data and unease over the economy will curb short-term demand for the yen, although capital flows and portfolio adjustments surrounding the fiscal year-end will probably be crucial for near-term currency direction.
The dollar again attempted to sustain a push above the 100 level in Europe before weakening back towards 99.50 as Wall Street edged lower.
Sterling
Sterling has generally remained under pressure over the past 24 hours as confidence in the economy and currency remained weak.
Consumer confidence also dipped further to a 15-year low of -19 in March from -17 previously which will reinforce fears over the outlook for spending while the Nationwide Bank reported a 0.6% drop in house prices for March.
Overall sentiment towards the UK currency remains generally weak with expectations of a series of interest rate cuts over the next few months, especially with evidence of further serious stresses in the mortgage sector.
The current account deficit fell to GBP8.5bn in the fourth quarter of 2007 from a revised GBP19.1bn previously. The headline data will provide some relief, but the improvement was led by a drop in earnings by foreign-owned banks which is not a positive Sterling factor.
Sterling weakened to fresh record lows around 0.7930 against the Euro and weakened to test levels below 1.99 against the dollar. Confidence is likely to remain fragile in the short term.
Swiss Franc
The dollar probed the parity level against the Swiss franc on Friday, but was unable to sustain the gains and weakened back to around 0.9950. The franc found some support close to 1.5750 against the Euro.
The Swiss KOF index weakened further to 1.54 in March from 1.65 the previous month. The steady decline over the past few months will maintain expectations of a significant slowdown in the economy which will undermine the Swiss franc to some extent.
The franc trends are still being driven by levels of risk aversion and persistent uncertainty over the financial sector curbed selling pressure on the currency.
Source: VantagePoint Software, Market Technologies, LLC
Australian dollar
The Australian dollar has retained a generally firm tone over the past 24 hours, but there was resistance close to the 0.9250 level with the currency around 0.9210 in early Europe on Friday. The currency has been supported by evidence of demand from Far East markets while commodity prices have remained generally firm.
The domestic influences have still remained limited at this stage. Sentiment surrounding the Australian dollar should remain slightly firmer in the short term, but caution will prevail given financial-market stresses and there was a retreat back to below the 0.92 level in US trading on Friday.
