Daily Market Update 25/03/2008

Asia Session
Published: March 25, 2008 11:37 PM

USD sellers managed to close the NY session firmly in control as EUR/USD remained firmly above 1.5600 and GBP/USD above 2.0000. However, we saw mostly choppy trading in Asia as there appeared to be a lot of two way action and it seems that buyers/sellers are battling. It was just last week we saw the USD rally significantly against major currencies but the recent USD sell off is putting that rally to the test: do we continue lower or is the USD ready to rally?

Economic data continues to point to weakness in the US as consumer confidence and home prices fell more than expected. The only bright spot for the USD appears to be the pull back in commodities as the two are negatively correlated. Those looking for the next move in the USD would be prudent to pay attention to the action in commodities. If oil or gold make new highs, look for EUR/USD to test all-time highs.

Looking forward we expect volatility to continue to dominate the market. There are still some concerns about the extent of potential write downs by US investment banks. Ironically, we could hear weakness in other countries which could actually put a bid in the USD. In Asia we are expecting Japanese CPI and employment data.

Upcoming Economic Data Releases:
Germany: (5am ET) IFO Business Climate and Expectations (relevance: medium).