Market Drivers for March 26, 2013
Markets much quieter post Cyprus settlement, uninsured depositors face 40% haircut
Kuroda offers nothing new in Parliament speech
Europe 0.07% Nikkei -0.60%
Oil $95/bbl
Gold 1602/oz.

Europe and Asia:
CHF KOF Institute March Economic Forecast

North America:
USD Durable Goods Orders 7:30
USD Consumer Confidence 9:00
USD New Home Sales 9:00

After yesterday’s tumultuous price action the currency markets were decidedly more quiet in early European trade today with EURUSD stabilizing at the 1.2850 level as the Cyprus crisis started to recede off the front pages. In Cyprus the banks were likely to remain closed until Thursday while estimates from the finance minister suggested that uninsured depositors faced haircuts of up to 40%.

Still, despite the brutal cost of the final settlement and the still unknown ramifications of the deal, the markets were considerably calmer today as traders felt that the EZ weathered yet another financial crisis. The spokesmen for Eurogroup President Joeren Dijsselbloem continued to backtrack from his earlier statement that depositors funds could now become part of any future bank restructuring in the EZ – a comment that only exacerbated risk aversion flows yesterday as investors feared for the safety of bank funds across periphery economies.

The calm today however, could simply be the pause that refreshes. As we noted yesterday downside pressures on the EUR/USD remain and they have much more to do with the lackluster rate of economic activity in the region rather than the latest saga on the sovereign debt front. So far there has been no evidence of any uptick in overall demand and the longer this trend continues the greater the pressure on ECB to ease further. This week’s calendar is relatively barren but the Retail data from Germany along with the employment figures due on Thursday could set up another downleg lower in the pair if they miss market expectations.

Meanwhile commodity dollars have been the star performers this week with both Aussie and kiwi holding their own against the buck. In New Zealand the better than expected Trade Balance numbers helped kiwi to remain bid near the 8350 level as the country posted a surplus of 414M vs 2M eyed. The Aussie has also been very firm, holding above the 1.0450 level and if risk appetite revives in North American session the pairs could make a run towards the 1.0500 and 8400 levels respectively.

In North America the calendar carries Durable Goods, Consumer confidence and housing data. New Homes sales are expected to decline slightly to 426K run rate from 437K the month prior but if they surprise to the upside it will be yet another sign of the underlying strength of the housing sector and a further boost to prospects for growth for the US economy.

After yesterday’s massive volatility today’s price action is likely to remain subdued with some short covering possibly pushing the EUR/USD towards the 1.2900 figure as tensions from Cyprus begin to disappear, but the longer term concerns for the euro continue to fester and the pair remains vulnerable to further downside pressure as the week proceeds.

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