WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
18 March 2007

Sunday

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GCI Foreign Exchange Research:         www.gcitrading.com/fxnews/
FX Research Desk:                                fxnews@gcitrading.com
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€

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3340 level and was supported around the $1.3105 level. The pair gained about 190 pips last week.  The dollar was pressured last week on fallout from the U.S. sub-prime mortgage crisis with Greenspan warning of “spillover effects.” ECB’s Bini-Smaghi said rates “must adjust” while ECB’s Liebscher said he “warns” anyone who thinks inflation is “under control.” Germany’s economic institutes lifted their Q1 and 2007 GDP forecasts.  Fed Governor Kroszner said the central bank cannot become “complacent” about inflation and the FOMC will meet on Tuesday and Wednesday. The ECB reported it sees “some moderation in GDP growth compared with Q4 2006.”

Data released in the U.S. last week saw February headline retail sales fell 0.1% while the ex-autos component was up +0.1% and the ex-gasoline and ex-autos component was off 0.3%, the weakest showing since April 2004; the Q4 current account balance narrowed to –US$ 195.8 billion and was –US$ 856.7 billion for all of 2006; February import prices were up 0.2% m/m and 1.3% y/y; February PPI was up 1.3% on the headline and 0.4% on the core an and up a respective 2.5% y/y and 1.8% y/y; weekly initial jobless claims were off 12,000 to 318,000; FRBNY’s Empire State manufacturing index fell to 1.85 in March from 24.35 in February; TICS January capital flows reached US$ 74.6 billion with net purchases of long-term securities up to US$ 115.0 billion; the mid-March University of Michigan consumer sentiment fell to 88.8 from February’s 91.3; February industrial output was up 1.0%, the largest gain since November 2005, with capacity utilization rising to 82.0%; and February consumer price inflation was up more-than-expected at 0.4% with core prices up 0.2%, down from January’s 0.3% gain.

Data released in the eurozone last week saw the German March ZEW business confidence indicator improve to 5.8 from 2.9 in February; Q4 provisional employment was up 0.3% q/q and 1.6% y/y; EMU-12 Q4 labour costs rose an annualized 2.4%; and EMU-13 February inflation was unchanged at 1.8% y/y.

Technical Outlook

Last week’s high (1) was above the 76.4% retracement of the 1.3365-1.2865 range and last week’s low (2) was just below the 50.0% retracement of the same range.  The 1.3246/ 1.3295/ 1.3364/ 1.3480/ 1.3580 levels represent upside resistance targets while the 1.3175/ 1.3115/ 1.3045/ 1.2923/ 1.2819/ 1.2776 levels represent downside support targets.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥115.75 level and was capped around the ¥118.50 level.  The pair lost about 150 pips last week.  The Nikkei 225 stock index closed the week at ¥16,744.15.  BoJ boss Fukui said there is “no direct link between the (BoJ’s recent) rate hike and the recent global stock market weakness.”  The Japanese government left its assessment of the economy unchanged this month, noting it is “recovering despite some weakness in consumption” and “consumer confidence has also been flat.”

Data released in Japan last week saw GDP upwardly revised to 1.3% q/q and an annualized 5.5% in the three months to December; the January current account surplus rose 49.8% y/y; February consumer sentiment printed at 48.4, up from 48.1; February corporate failures were off 2.9% m/m; January industrial output was off 1.7% m/m; foreigners sold a net ¥429.9 billion of Japanese equities last week; the January tertiary index was up 1.6% m/m; and the January leading index was upwardly revised to 49.0 from 35.0.

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.7360 in the over-the-counter market, down from CNY 7.7445. PBOC boss Zhou said China must reduce its trade surplus and said the CPI has been “comparatively” high in recent months. PBOC reiterated it will continue to pursue convertibility of the yuan on the capital account.

Data released in China last week saw the February trade surplus print at US$ 23.76 billion; the February producer price index was up 2.6% y/y; the M2 money supply was up 17.8% y/y at the end of February; the February consumer price index climbed 2.7% y/y; actual foreign direct investment was up 13.04% in January and February; February wholesale prices were up 4.5% y/y; retail sales climbed 14.7% y/y in January and February; and industrial value-added output climbed 18.5%.

Technical Outlook

Last week’s high (1) was just above the 50.0% retracement of the 114.45-122.15 range and last week’s low (2) was just below the 76.4% retracement of the same range. Upside resistance targets remain the 117.39/ 118.40/ 119.21/ 120.34/ 121.35 levels while downside support targets remain the 115.19/ 114.43/ 113.82/ 111.91 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 1.9505 level and was supported around the $1.9210 level.  The pair gained about 85 pips last week.  CBI lifted its 2007 GDP forecast to 2.9% from 2.7%.  BoE’s Chief Economist and MPC member Bean was tapped for another three-year term. A BoE inflation expectations survey saw expectations remain elevated at 2.7%.  Chancellor Brown is expected to present a relatively optimistic Budget forecast next week.

Data released in the U.K. last week saw February output prices rise 2.2% y/y; February input prices were up 1.3% m/m; core output prices rose sharply; the DCLG January measure of U.K. house prices was up 10.9% y/y; the London Retail Consortium reported February like-for-like retail sales rose 7.2% y/y; RICS house prices decelerated in February to post their smallest monthly gains since May 2006; the U.K. global trade deficit narrowed to -₤6.2 billion, its best level since October 2005; earnings growth including bonuses rose 4.2% in the three months to January, up from 4.0% in the three months to December; and February IRS pay awards remained unchanged at 3.5%.

Technical Outlook

Last week’s high (1) was above the 38.2% retracement of the 1.9915-1.9180 range and last week’s low (2) was right at the 50.0% retracement of the 1.8515-1.9914 range. Upside resistance targets include the 1.9548/ 1.9634/ 1.9741/ 1.9847/ 1.9914/ 2.0035 levels while downside support targets include the 1.9380/ 1.9259/ 1.9175/ 1.9049/ 1.8966 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.2025 level and was capped around the CHF 1.2350 level. The pair lost about 265 pips last week.  SNB lifted rates by +25bps as expected to 2.25%, its sixth consecutive rate hike since December 2005.  Notably, the central bank kept its 2007 GDP growth forecast unchanged at 2% and raised its inflation forecast to 0.5% from 0.4%

Data released in Switzerland last week saw the ZEW March sentiment indicator decline to -28.0 from -17.3 in February; and January retail sales were up 5.1% y/y.

Technical Outlook

Last week’s high (1) was above the 50.0% retracement of the 1.2768-1.1877 range and last week’s low (2) was below the 76.4% retracement of the 1.1877-1.2569 range.  Upside resistance targets include the 1.2141/ 1.2217/ 1.2323/ 1.2428 levels while downside support targets include the 1.2040/ 1.1920/ 1.1877/ 1.1758 levels.

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.1780 level and was supported around the C$ 1.1680 level.  The pair gained about 30 pips last week.  Canada’s federal budget for FY 2007-2008 will be presented on Monday.

Data released in Canada last week saw labour productivity climb 0.3% in Q4 2006 and by 1.2% for all of 2006, down from 2.1% in 2005. Also, Q4 industrial production capacity declined to 82.5% from 83.4% in Q3.

Technical Outlook

Last week’s high (1) was above the 61.8% retracement of the 1.1875-1.1562 range and last week’s low (2) was just below the 38.2% retracement of the same range.  Upside resistance targets include the 1.1830/ 1.1975/ 1.2042/ 1.2306 levels while downside support targets include the 1.1675/ 1.1551/ 1.1451/ 1.1353/ 1.1327/ 1.1174 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.7975 level and was supported around the US$ 0.7795 level. The pair gained about 150 pips last week. RBA’s Edey warned inflation should moderate in the next two years to about 2.75% but said this will “likely be too high.”

Data released last week saw January housing finance by volume rise 0.3% m/m; February ANZ job advertisements were up 3.4% m/m and 24.8% y/y; the February NAB business confidence index improved to 12.0 points from 6.0 points in January; the Westpac March consumer sentiment index was up 3.7% m/m; and the February jobless rate rose to 4.6% from 4.5% in January.

Technical Outlook

Last week’s high (1) was above the 76.4% retracement of the 0.7979-0.7678 range and last week’s low (2) was right at the 38.2% retracement of the same range.  Upside resistance targets include the 0.7979/ 0.8002/ 0.8057 levels while downside support targets include the 0.7908/ 0.7846/ 0.7793/ 0.7697/ 0.7611/ 0.7548 levels.

SCHEDULE

Sunday, 18 March 2007

all times GMT

(last release in parentheses)

N/A

Monday, 19 March 2007

all times GMT

(last release in parentheses)

0001     UK                    March Rightmove house prices (0.9% m/m)

0001     UK                    March Rightmove house prices (11.5% y/y)

0530     Japan               February Tokyo department store sales (-0.1% y/y)

0530     Japan               February department store sales (0.0% y/y)

0815     CH                    Q4 industrial production (-0.5% q/q)

0815     CH                    Q4 industrial production (8.2% y/y)

1230     Canada             January international securities transactions (-C$ 3.26 billion)

1230     Canada             January wholesale sales (2.7% m/m)

1230     Canada             January wholesale inventories (-0.8%)

1700     US                    March NAHB housing market index (40)

2000     Canada             Fiscal year 2007-2008 federal budget

Tuesday, 20 March 2007

all times GMT

(last release in parentheses)

N/A       Japan               Bank of Japan interest rate decision

0030     Australia           Q4 dwelling starts (0.3%)

0600     Japan               Bank of Japan monthly report

0630     Japan               Bank of Japan Governor Fukui speaks

0700     Japan               February convenience store sales (-0.7% y/y)

0700     Germany           February producer prices (0.0% m/m)

0700     Germany           February producer prices (3.2% y/y)

0815     CH                    February producer and import prices (-0.2% m/m)

0815     CH                    February producer and import prices (2.2% y/y)

0900     Italy                  January industrial orders (0.7% m/m)

0900     Italy                  January industrial orders (3.4% y/y)

0900     Italy                  January industrial sales (2.7% m/m)

0900     Italy                  January industrial sales (2.7% y/y)

0930     UK                    February consumer price index (-0.8% m/m)

0930     UK                    February consumer price index (2.7% y/y)

0930     UK                    February consumer price index, core (1.6% y/y)

0930     UK                    February retail price index (-0.5% m/m)

0930     UK                    February retail price index (4.2% y/y)

0930     UK                    February RPIX (-0.7% m/m)

0930     UK                    February RPIX (3.5% y/y)
0930     UK                    February public sector net borrowing (-₤10.3 billion)

0930     UK                    February public sector net cash requirement (-₤21.4 billion)

0930     UK                    February BBA net consumer credit (-₤0.013 billion)

0930     UK                    February BBA net mortgage lending (₤5.6 billion)

0930     UK                    February CML gross mortgage lending (₤26.8 billion)

0930     UK                    February M4 sterling lending (₤31.6 billion)

0930     UK                    February M4 money supply (13.0% y/y)

1000     Eurozone          January construction output (0.5% m/m)

1000     Eurozone          January construction output (6.9% y/y)

1100     Canada             February consumer price index (0.1% m/m)

1100     Canada             February consumer price index (1.2% y/y)

1100     Canada             February consumer price index, core (0.1% m/m)

1100     Canada             February consumer price index, core (2.1% y/y)

1230     US                    February housing starts (1.408 million)

1230     US                    February building permits (1.568 million)

1255     US                    Redbook retail sales (0.2%)

2330     Australia           January Westpac leading index (0.6% m/m)

Wednesday, 21 March 2007

all times GMT

(last release in parentheses)

N/A       Japan               Financial markets closed

0000     Australia           March DEWR skilled vacancies (0.5% m/m)

0300     NZ                    February credit card spending (6.7% y/y)

0715     CH                    February trade balance (CHF 1.29 billion)

0800     Belgium            European Central Bank President Trichet speaks

0830     Italy                  March consumer confidence (111.7)

0900     Italy                  Q4 unemployment rate (6.8%)

0930     UK                    Bank of England MPC meeting minutes, 7-8 March

0930     UK                    February FT house prices (6.9% y/y)

1100     UK                    MBA mortgage applications (2.8%)

1230     UK                    Fiscal year 2007-2008 Budget

1230     Canada             February leading indicators (0.5% m/m)

1230     Canada             January retail sales (2.3% m/m)

1230     Canada             January retail sales, ex-autos (2.0% m/m)

1430     US                    EIA crude oil stocks (1.1 million barrels)

1815     US                    Federal Open Market Committee interest rate decision)

2350     Japan               Q1 BSI large manufacturing (7.1% q/q)

2350     Japan               Q1 BSI large all industry (6.4% q/q)

2350     Japan               February merchandise trade balance total

Thursday, 22 March 2007

all times GMT

(last release in parentheses)

0500     Japan               February supermarket sales (-2.4% y/y)

0750     Japan               Land prices (-2.8%)

0930     UK                    February retail sales (-1.8% m/m)

0930     UK                    February retail sales (3.3% y/y)

1000     Eurozone          January trade balance (€2.5 billion)

1000     Eurozone          January industrial new orders (2.8% m/m)

1000     Eurozone          January industrial new orders (1.6% y/y)

1100     UK                    March CBI industrial trends survey

1100     UK                    March industrial trends, total orders (4)

1100     UK                    March industrial trends, export orders (1)

1230     US                    Weekly initial jobless claims (318,000)

1230     US                    Continuing jobless claims (2.576 million)

1320     US                    Federal Reserve Chairman Bernanke speaks

1400     US                    February leading indicators (0.1%)

1600     US                    Richmond Fed President Lacker speaks

1630     US                    Federal Reserve Governor Kroszner speaks

1730     US                    Federal Reserve Vice Chairman Kohn speaks

2300     Australia           January leading index (0.2%)

2350     Japan               January all-industry activity index (0.0% m/m)

Friday, 23 March 2007

all times GMT

(last release in parentheses)

N/A       Canada             Bank of Canada Senior Deputy Governor Jenkins speaks

0700     Germany           February import price index (-0.7% m/m)

0700     Germany           February import price index (0.7% y/y)

0745     France              February consumer spending (1.2% m/m)

0745     France              February consumer spending (7.1% y/y)

0745     France              Q4 wages (0.3% q/q)

0900     Italy                  January retail sales (0.0% m/m)

0900     Eurozone          January current account (€2.3 billion)

0900     Italy                  January retail sales (0.9% y/y)

1100     Germany           European Central Bank member Stark speaks

1230     US                    Richmond Fed President Lacker speaks

1315     US                    Philadelphia Fed President Plosser speaks

1400     Netherlands       European Central Bank Vice President Papademos speaks

1400     US                    February existing home sales (6.46 million)

1400     US                    February existing home sales (3.0% m/m)

1530     US                    New York Fed President Geithner speaks

1530     US                    Richmond Fed President Lacker speaks

Saturday, 24 March 2007

all times GMT

(last release in parentheses)

0215     US                    Federal Reserve Governor Mishkin speaks

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.