New Zealand Keeps Rates Unchanged, AUD and CAD Rise on Gold and Oil Prices (page 2 of 2)

Does this mean that they will intervene in the NZD? Maybe, but as we have seen from their past intervention, there should not be a lasting impact on the currency. Australia will be releasing their trade data tonight and Canada will be releasing IVEY PMI tomorrow; expect more active trading in the commodity currencies.

ECB Trichet Expected to Keep Interest Rates and Bias Unchanged

The European Central Bank is not expected to alter interest rates at tomorrow's monetary policy meeting. Stronger economic data and continued inflationary pressures should also keep the tone and bias of Trichet's post meeting press conference unchanged. Retail sales rose 0.4 percent in the month of January while service sector growth accelerated in both France and Germany during the month of February. The continual rise in oil and food prices is boosting inflationary pressures and the risk of second round effects, which is the ECB's greatest fear. They need interest rates and their currency to remain high in order to have any chance of bringing inflation back down to their target. Therefore comments from Trichet could drive the EURUSD even higher.

Bank of England: Still Dovish

Like the European Central Bank, the Bank of England is expected to leave interest rates unchanged tomorrow. Although they face inflationary pressures like the ECB and recent economic data including today's service sector PMI was stronger than expected, their monetary policy statement should still contain a tinge of dovishness. UK growth faces more immediate risks than Eurozone growth which is why their bias should be different from the ECB's and why the EURGBP hit an all time record high today. We expect this trend to continue as we believe that the monetary policies of the ECB and BoE lead to further EURGBP strength. As for the GBPUSD, the anticipation of a weak non-farm payrolls report on Friday could help keep the GBP/USD near its year to date highs.

Japanese Firms Hit by USDJPY Weakness

All of the Japanese Yen crosses are up strongly today thanks to a recovery in US stocks. The price action in the Yen crosses suggest that we could see a more meaningful rally which is supported by the stories in today's Wall Street Journal. According to the financial paper, Japanese firms are beginning to suffer as a result of the dollar's weakness against the Yen. In the fourth quarter for example, Toyota Motor Corp approximately $194 million in currency related losses. We expect this trend to continue.