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Forex Analysis
by ForexNewsNow Team on February 25th, 2011

ForexNewsNow Daily Market Outlook for February 25th, 2011

NEW YORK (Forex News Now) – Daily Market Overview – The U.S. Dollar continued its decline against all of the other major foreign currencies on Thursday, with the exception of Sterling, according to the daily forex news.

The Greenback traded lower as strategic commodity prices remained firm in response to the Libyan revolt. In particular, the price of gold was trading around $1,400 per ounce that kept the AUDUSD rate firmly above parity. Also, crude oil was boosted above the psychologically important $100 per barrel level, and this helped send USDCAD to a fresh long term low at 0.9809 overnight.

Interestingly, the GBPUSD news showed Sterling was the only major currency to decline against the Greenback on Thursday, in part due to a worse than expected CBI Realized Sales number that came out far below consensus at 6 versus the anticipated 30 result. Cable eventually found a base after dissenting MPC member Andrew Sentance’s made rather hawkish comments at the Ashridge Alumni event held in London.

EURUSD analysis showed the common currency continued gaining sharply against the U.S. Dollar on Thursday as U.S. economic data came out mixed. Euro traders are now looking to German CPI data due out today, as well as next week’s ECB meeting where the central bank is expected to take a more focused position in dealing with mounting inflationary pressures within the E.U.

Elsewhere, the New Zealand Dollar that had softened in the wake of a strong earthquake which rocked Christchurch gained was boosted on Thursday after the S&P rating agency indicated that the country’s credit rating would likely not be affected by the recent calamity. Nevertheless, the agency stated that it was too early to make an assessment on the, “overall implications of the considerable disruption to the Canterbury region and the broader New Zealand economy”.

February 24th Important Economic Developments:

  1. The Libyan Revolt Keeps Gold and Oil Firm – The ongoing Libyan political crisis is being closely watched by the forex market for signs of escalation that could boost the price of gold and/or oil significantly. The price of gold hit a new recent high at the 1418.09 level yesterday after the death toll in the Libyan rebellion rose as a sit-in supportive of protestors was fired on in a mosque. In response, the AUDUSD rate stayed firmly over parity, with 1.0136 being the intraday high point for the pair.
  2. Sterling Lower on Poor CBI Realized Sales but Sentance Hawkish –Sterling weakened to an intraday low point of 1.6084 yesterday after the latest U.K. release of CBI Realized Sales showed that the closely watched indicator dropped to 6 from its previous 37 reading that was far below the market’s consensus of 30. Nevertheless, hawkish comments made in London at the Ashridge Alumni event by dissenting MPC member Andrew Sentence supported the rate. He commented that, “The time has come to increase interest rates”, and went on to say that, “We should increase them gradually and slowly if we can. But the risk of delaying interest rate rises too long is that this gradual approach may cease to be an option in the future.”
  3. U.K. Gfk Consumer Confidence Slightly Lower – This month’s release came out at -28 that was slightly worse than the expected -27 result, although something of an improvement over its previous reading of -29. This important diffusion index computed by Gfk NOP is based on surveyed consumers, with levels above zero indicating optimism, and below that signifying pessimism. Cable dipped to 1.6119 in the wake of its release, after having traded at 1.6135 beforehand.
  4. Japanese CPI Data Mixed – This month’s Tokyo Core CPI release came out at -0.4% y/y versus the expected change of -0.3% and compared with the unrevised previous reading of -0.2%. Nevertheless, the less significant National Core CPI printed at -0.2% y/y that was higher than the anticipated -0.3% fall and last month’s -0.4% drop. This important Tokyo Core CPI inflation indicator gauges the change in the price of goods and services that are bought by Tokyo consumers, with the exception of fresh food. USDJPY was boosted to its daily high of 82.05 after the release, but soon gave back all of its gains and then some.
  5. U.S. Durable Goods Data Mixed – U.S. Core Durable Goods Orders fell by a disappointing -3.6% compared with the anticipated +0.4% gain the market was looking for. Nevertheless, this drop was largely compensated for by a large revision to the previous number from +0.5% to +3.0%. Also, Durable Goods Orders came out better than the +2.5% rise anticipated at +2.7%, and the former number was also revised up substantially to +2.5% versus the previous -0.4% release.

February 25th Forex Events for Traders to Watch

  1. The Libyan Crisis and its Effect on Gold and Oil – The ongoing Libyan political crisis will be closely watched by the market for signs of escalation that could boost the price of gold and/or oil significantly. Higher gold prices generally improve the AUDUSD rate, and by association NZDUSD, while higher oil prices tend to send USDCAD lower.
  2. U.K. and U.S. GDP Data Due Out – Both the United States and Britain will release key GDP growth data today, with U.K. Revised GDP expected to show a contraction of -0.5% q/q this month after the previous -0.5% result. On the other hand, U.S. Preliminary GDP is anticipated to improve slightly to +3.3% versus the +3.2% seen previously. These indicators measure the change in the value of all goods and services produced by the relevant economy.
  3. Swiss KOF Economic Barometer – This closely watched composite index is computed by the KOF Economic Research Agency for the Swiss economy and is based on twelve economic indicators. This month’s release is expected to fall a touch to 2.08 from its previous reading of 2.10, and a higher than expected result could boost the Swiss Franc. The impact of this number is variable, but since it can induce considerable volatility in USDCHF, this could make purchasing a binary option straddle or strangle on the rate a potentially interesting limited risk strategy.
  4. Revised University of Michigan Report – The University of Michigan will release its closely watched Consumer Sentiment survey today that is expected to improve slightly to 75.5 from last month’s 75.1 result. Furthermore, last month’s Inflation Expectations survey was at 3.4%. A better than expected result in either number could boost the Greenback.
  5. German Preliminary CPI – A closely watched indicator of German inflation, the German Preliminary CPI data measures the change in the price of consumer goods and services purchased in Germany. The preliminary data is released throughout the day, and is considered more significant than the final data released about 15 days later. German Preliminary CPI is currently expected to rise by +0.5% m/m compared with the previous month’s -0.4% fall that has been revised higher from the -0.5% initially reported. A higher number than expected will tend to positively affect EURUSD.

By ForexNewsNow Team

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