Currency Markets Expected To Be Busy This Week

Asian currency markets have seen a lot of action to begin the week. Asian shares continue to decline after the sell off on Wall Street last week. The US dollar weakness continued over the following days, helped by the minutes of the most recent US Federal Reserve meeting that showed the Fed will keep its interest rate at its near zero per cent level for “a considerable time”. The US dollar added 13 points this morning to trade at 79.69

The Aussie rallied above 0.94 on Thursday for the first time in five months after the local unemployment rate for March had a surprise fall of 0.3 percentage points to 5.8 per cent. The Aussie gave back 9 points this morning against the stronger US dollar to trade at 0.9390 as there was no Asian data this morning. The kiwi followed the Aussie to trade at 0.8676 down by 14 points as safe haven trading became the sentiments of the morning markets as tensions with Russia soared and violence escalated in the Ukraine over the weekend.

Safe haven assets such as the US dollar, the Japanese yen and gold all gained in the early session. Gold added 8.80 to trade at 1327.80 while the yen climbed by 7 points against the US dollar to trade at 101.56 and soared against the euro to trade at 1.4066 with the yen gaining 46 points.

Ukraine gave pro-Russian separatists a Monday morning deadline to disarm or face a “full-scale anti-terrorist operation” by its armed forces, raising the risk of a military confrontation with Moscow.

The euro eased this morning at 1.3850 against the US dollar after comments from ECB members over the weekend. European Central Bank president Mario Draghi, speaking after the International Monetary Fund’s spring meeting in Washington, warned that further strength in the euro would prompt more stimulus. The ECB earlier this month kept interest rates steady at a record low 0.25 per cent and Mr Draghi said its members were unanimous in their willingness to begin quantitative easing if inflation stayed well below their 2 per cent target. Policymakers are concerned that low inflation could hurt the region’s economic recovery by reducing consumer spending and making it more difficult to repay debt. ECB President Mario Draghi on Saturday told a news conference that “a further strengthening of the exchange rate would require further stimulus.

The ECB is ready to make asset purchases if it deems them necessary to counter a prolonged period of low inflation, ECB Executive Board member Benoit Coeure said on Sunday. ECB governing council member Christian Noyer said on Monday in an interview with daily newspaper Le Figaro that euro weakening was desirable.

The coming week is packed full of events before closing on Friday for Easter Friday. The shortened week is expected to be full of surprises. A raft of Fed officials is also scheduled to speak this week. Other clues on the state of the US economy will come in the form of reports on retail sales and business inventories, due today; the consumer price index and the Empire State manufacturing survey, due Tuesday; industrial production and Atlanta Fed business inflation expectations, due Wednesday; weekly jobless claims and the Philadelphia Fed survey, due Thursday. The next Fed Beige Book, a respected source of anecdotal information on the current state of the economy across the US, is due on Wednesday. The big event this week will be Chinese GDP number due in the middle of the week.