By ForexMansion.com
Riskier assets performed well broadly across the capital markets spectrum. Equity prices as well as commodities moved higher, and the Yen eased against most major currencies.
The nuclear crisis in Japan appears to be getting under control as power is restored to parts of the Fukushima plant. Japanese markets are closed due to Vernal Equinox Day. The G7 intervention appears to have been effective in stemming yen appreciation. The coordinated action was sufficient to insert two-way risk into FX markets, which had been mostly driven by speculative accounts rather than by fundamentals. The timing and magnitude of repatriation of funds by Japanese real money remains unclear.
EU finance ministers met today in Brussels to work out the details of the announced changes to EFSF ahead of this weekend’s summit, when the deal is supposed to be closed. EUR/USD edged above 1.42 and is poised to test 1.4250 which is , the highest level since November 2010. Markets are still focusing on the likelihood that the ECB starts hiking rates at its next meeting on April 7, a view reinforced by the recent comments by ECB President Trichet.
European Central Bank President Jean-Claude Trichet on Monday signaled the ECB is likely to increase interest rates as soon as next month. Trichet cited the comments made after the recent ECB’s policy statement on March 3, when the central bank warned that “strong vigilance” was needed on inflation.
Other top ECB officials echoed his remarks, suggesting that unrest in the Middle East, military strikes against Libya and the crisis in Japan haven’t budged the ECB from its view of mitigating inflation.Â
Tomorrow in Europe there is little fundamental data but in the UK, the markets will focus on consumer and retail inflation. The CPI and RPI (930 GMT), will give investors a current state of inflation in the UK. Given the BOE’s propensity to focus on inflation, this number should be market moving. A higher than expected number should draw bullish attention toward the pound.
After two days of military action in Libya, operation Odyssey Dawn appears to have been successful in at least preventing Gaddafi forces from attacking the opposition stronghold in Benghazi and enforcing a no-fly zone over the country. However, comments by Gaddafi over the weekend suggest that he will keep up the fight. Oil prices moved higher after a coalition of countries created a no-fly zone during the weekend.
