Evening report-Mar 06.

Rupee was seen stronger as gains in other Asian currencies against the dollar as boosted sentiment and marginally rising stocks aided the sentiments. U.S. Non-farm payroll report will be the major event risk for the U.S. trading session, as it is expected to show the economy lost 640,000 jobs in February. Additionally, the unemployment rate is expected to have risen to 7.9% which is not a surprise as initial jobless claims have printed above 600,000 throughout the month. However, the dour data may not provoke the expected flight to safety as the results have been anticipated with the ADP private job report showing losses of 692,000. Yet we could see fundamentals start to drive price action again which could lead to the continuation of the dollar weakness.Euro surprisingly rose to an intraday high of 1.2725 despite the ECB cutting rates by 50 bps and a 4% sell off in U.S. equity markets. The central bank brought its benchmark rate to 1.50% and signaled that more easing is a possibility. President Trichet stated that he could not rule out further easing after the rate decision. Those comments were reinforced today who said that the bank must be ready to react of deflation concerns rise but he also warned of overshooting with rate cuts which is more in line with the measured approach the MPVC has maintained. Traders may be relieved that that the central bank is becoming more aggressive which could limit the downturn for the Euro-zone economy which could provide short-term support for the Euro.pound reached as high as 1.4287 before finding resistance and finds itself consolidating above the 1.4200 price level. Sterling has steadily climbed higher since hitting its weekly low of 1.3964 despite the BoE cutting rates by 50 bps yesterday. Traders chose to ignorefactory gate prices falling from 3.5% to 3.1% -the lowest level since 2007. Fuel prices falling by 4.5% led the decline but a 7.7% increase in crude oil costs could be a sign that prices may start to stabilize. The inflation data was rendered insignificant by yesterday’s actions by the BoE. The central bank brought its benchmark rate to a record low of 0.50% and confirmed that it would begin quantitative easing. The MPC is betting that the will be able to jump start the economy and help liquidate credit markets. However, the risks are that they could reignite inflation risks and create an environment of stagflation. Yen fell nearly 200 bps on broad based dollar weakness. Currency regained some of its safe-haven status as the U.S. economy continues to weaken. Rumors of a 1 million NFP print could be a possible source of dollar weakness and flows returning to the Yen. The deteriorating state of both the economy and the political situation appears likely to add momentum to negative sentiment about Japanese assets.