FOREX WEEK IN REVIEW

Until last Friday, the Dollar havent responded to economic data positively for few months. Dollar rised sharply against thier crosses as it seems that economic recession is over. NFP data came in much better than market expectation, but adding to the worst Unemployment Data surprisingly climbed to 9.4% which is 26 years high. Indeed, fed fund futures are pricing in full probability of Fed raising rates to 0.50% by December. Early 2010 Fed funds futures are even fully priced for Fed to have another 25bps high to 0.75% in Feb. UA Dollar technically bottomed out at 78.33 and showing lot of upside potential.

Central Banks like RBA, ECB, BoE, BoC have all left rates unchanged last week. RBA is somewhat adopting an easing bias as "the prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed". ECB lowered forecast for GDP and CPI along with the decision to keep rates unchanged. BoC reiterated to keep it at current level until the end of the second quarter of 2010 so as to achieve the inflation target.

From England we witnessed to see a lot repeated calls for Prime Minister Gordon Brown to stepped down after the expenses scandal, resignation of key members of the Cabinet and then the worst local election defeat in three decades. But Brown refused to quit and instead reshuffled to cabinet.

THE WEEK IN AHEAD

The main focus will be on USD, will USD strength sustain or not and political developments in UK. The key data from US is Retail Sales and Trade Balance. From UK we will have Manufacturing Production then from Canada we have Housing Starts and Trade Balance. Interest Rate to be decided by RBNZ.