- British Pound Remains a Laggard as UK Industrial Output Hits 28-Year Low
- Euro Tests 1.28, Tumbles Lower as ECB’s Weber Signals Further Rate Cuts
- New Zealand Dollar Could See Heightened Volatility on Expected RBNZ Rate Cut
Risk appetite was strong for much of the day, pushing the S&P 500 up 6.37 percent by the end of the day and weighing on the US dollar and Japanese yen on word that Citigroup was having its best quarter since posting a profit in 2007 and amidst reassuring comments by Federal Reserve Chairman Ben Bernanke. During a speech to the Council on Foreign Relations, Bernanke said that the US will ensure banks have sufficient capital, and urged the overhaul of rules for the biggest financial firms in order to “make the financial system as a whole better able to withstand future shocks, but also to mitigate moral hazard and the problem of too big to fail by reducing the range of circumstances in which systemic stability concerns might prompt government intervention.” Meanwhile, wholesale inventories fell for the fifth straight month in January at a rate of 0.7 percent, as businesses try to keep up with declining demand. Indeed, wholesale sales have been consistently falling negative since July 2008, which has led the inventory/sales ratio to climb from 1.06 in June 2008 to 1.30 in January 2009, suggesting that business are burdened with additional costs as they carry excess supplies.
Looking ahead to Wednesday, there will be no key US economic indicators released, leaving the forex markets to move with risk trends during the US trading session. Something that I’ve been focusing on in particular is the status of the DXY index, which has thus far managed to hold above support from the March 6 lows and a rising trendline. If we see a break below this level, the move will likely signal an important turn for the greenback across many of the majors. However, as long as the index holds above support, bullish potential remains for the US dollar.
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