Don't Expect Any Intervention from the ECB (page 2 of 2)

The unemployment rate dropped from 2.8 to 2.7 percent, a 5 ½ year low. Watch out for USD/CHF because could be the next currency pair to fall below parity.

USD/JPY Hits 3 Year Low

The 200 point drop in US stocks has triggered a round of selling in USD/JPY that took the currency pair down to a 3 year low. This is sure to put further strain on Japanese corporations who will see their profits dwindle as the US dollar continues to fall. The leading and coincident index both deteriorated in the month of January reflecting the softness of Japanese growth. There is no major support in USD/JPY until 101.70, the 2005 low. The S&P 500 and NASDAQ are also trading at the lowest levels since 2006. If this pessimism spills into Asia, we could see further weakness in the Yen crosses. At this time, the market's appetite for risk is the only thing that matters.

British Pound Falls to Record Lows Against the Euro

The British pound fell to a record low against the Euro even though it climbed close to 1 percent against the US dollar. The divergent price action of the British pound indicates that the move in the currency pairs was driven not by the pound but by the Euro and US dollars. As the market expected, the Bank of England kept interest rates unchanged at 5.25 percent. No statement is released when the central bank fails to alter interest rates. The minutes will be released on March 19 and we suspect that some of members of the monetary policy committee such as Blanchflower voted in favor of cutting interest rates.

Australian, New Zealand and Canadian Dollars Sell Off

The Australian, New Zealand and Canadian dollars all sold off against the greenback. The biggest loser was the Aussie which was already suffering under the weight of a larger deficit. Imports were three times larger than exports which could be a growing problem as the US and Chinese economies begin to slow. There was no economic data released from New Zealand, but Canada actually reported stronger than expected IVEY PMI. After a series of disappointments, the surge to an 8 month high comes as a complete surprise. Canada will be releasing their employment report tomorrow morning before the US numbers. The rebound in the employment component of IVEY PMI suggests that employment growth should be stronger than the market's 3k forecast.