Dollars 2 Pounds

Crude oil, gold and silver may decline if the US Federal Reserve signals that policy makers are getting closer to raising benchmark interest rates at the upcoming FOMC monetary policy announcement.

The Euro may see an outbreak of volatility as a survey of German investor confidence drops for the sixth consecutive month while EU finance ministers conclude a summit that promises to produce the blueprint for Greek bailout.

Friday’s close above 1.3700 strengthens the case for the formation of a short-term bottom, but it is 1.3800 that now becomes the key level to watch above.

• Dollar Plunge Fails to Materialize as Sentiment Restrained by Sovereign Debt Risk
• Euro Slips as Policy Officials Fail to Produce a Clear Contingency Plan for Greece
• British Pound Confidence Shaken by Moody’s Credit Warning
• Japanese Yen Firms as Government Economic Outlook Improves, Focus on Exchange Rates Subsides
• Australian Dollar Finds Little Guidance Either Way for RBA Policy in Minutes

A sharp decline through the week’s open for crude is a convincing sign that the market has indeed reversed course after running a five-week bullish trend and just before testing two-month highs. In fact, the active futures contract on the NYMEX would put in for the biggest single-day decline in two weeks, a move that would subsequently confirm the first back-to-back daily loss for the instrument since the February 4th/5th plunge.

The euro ended a three day rally against the dollar as concerns that emerging markets China and India will look to take measures to slow their economies. A broader pull back in risk appetite has weighed on the EUR/USD which has maintained a 43% correlation with stock markets over the past month.

The Federal Open Market Committee is widely expected to hold the benchmark interest rate at 0.25% in March as the central bank aims to encourage a sustainable recovery in the world’s largest economy, but comments following the rate decision are likely to spark increased volatility in the exchange rate as Fed aims to normalize policy this year.

US Dollar at Risk for Further Declines versus Euro on FX Positioning
Euro Will Struggle to Develop a Trend with Greece Back in the Headlines
Japanese Yen: Speculation for Intervention to Intensify Ahead of BoJ
British Pound May Rise as Bank of England Releases Meeting Minutes
Swiss Franc Vulnerable As SNB Threat Grows
Canadian Dollar on Pace for Parity Against the US Dollar
Australian Dollar May be Losing its Cache as the Only Carry Currency
New Zealand Dollar Drivers Lacking, Ranges Set  to Persist