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  Interest Rates   US: Japan: Eurozone: UK: Switzerland:   1.75%  0.15%  3.=
25%  4.0%  1.25-2.25%       [IMAGE] =09 [IMAGE]  Euro Falls on EMU Concerns=
, JPY Steady After Bush Visit  February 18, 7:00 AM: EUR/$..0.8711 $/JPY..1=
32.74 GBP/$..1.4282 $/CHF..1.6996  Euro Falls on EMU Concerns, JPY Steady A=
fter Bush Visit by Jes Black  Market Holiday  The euro came under renewed p=
ressure today as the European Monetary Union's credibility came back into q=
uestion. EUR/USD fell 1/3 cent from a day's high of 87.40 to a low of 87.11=
 after trading most of the day in a tight 10 pip range. First to knock the =
euro was an unexpectedly pessimistic EMU report from Sweden that warned a m=
onetary union area may not become a stable low inflation, low interest rate=
 environment as hoped. Therefore, it is not certain that the euro will be a=
 stable "hard currency" area. Moreover, the report highlighted the latent t=
hreat of diverging national growth dynamics within the union.  This brings =
to mind Germany's dilemma of needing a boost from either lower interest rat=
es or higher fiscal spending. But the European Central Bank has been unwill=
ing to lower rates below 3.25% for fear of stoking inflation. Meanwhile, th=
e European Union government would like to censure Germany for irresponsible=
 spending which is pushing their debt levels close to the 3% of GDP limit s=
et out in the Maastrict treaty.   Further weighing on the euro was German C=
hancellor Schroeder's remark today that his government has not come up with=
 a list of spending cuts or tax hikes to reign in Germany's budget deficit.=
 German states do not want to reduce spending and this now compromises Fin =
Min Eichel's promise to the EU that the government would bring the budget c=
lose to balance by 2004, which was part of the compromise under which Germa=
ny avoided an embarrassing censure from the EU this month for its rising de=
ficit. This also suggests that there is no way Eichel's promise can be met =
and that they may indeed face a fine from the EU this year if their growth =
projections are too high and revenue therefore too low, which would push th=
e deficit to GDP ratio above the 3% limit.  EUR/USD fell to key support at =
87.10 and could threaten the 86.80 level which marks the 50% retracement of=
 the 85.63 to 88.03 move. Follow up support is seen at 86.50 and this month=
's 6 month low of 85.63. Failure to regain the key 87.40/50 mark will likel=
y keep pressure on the pair after it rebounded from last week's low of 86.8=
0 but met with heavy resistance at 87.46.  GBP/USD also fell to a day's low=
 of 1.4282 after rising to a day's high of 1.4330 but failing to break key =
resistance around1.4340/50. Sterling also failed to break resistance at the=
 60.80 pence level against the euro and subsequently fell to a day's low of=
 61.01. On Thursday, GBP/USD briefly rose to a new 3-week high of 1.4362 fo=
llowing surprisingly upbeat UK jobs data which raised the expectations of t=
he Bank of England raising rates later this year, which tend to benefit ste=
rling. However, 1.4340/50 marks the 61.8% retracement of the move from 1.45=
15-1.4040 move and has so far provided tough resistance. Without a break of=
 that level, the pair remains heavy, dealers say. Support seen at previous =
resistance levels of 1.4235 and 1.4180.  USD/CHF rose to a day's high of 1.=
7004 from a low of 1.6968 after holding above support at 1.6960/50. Resista=
nce is now seen at 1.7055 which marks the 61.8% retracement of the 1.7229-1=
.6770 move. Support is seen at 1.6960, 1.6890 and 1.6820.  Meanwhile, the y=
en was little changed today, as the market remained cautious about the dire=
ction of USD/JPY after today's comments from Tokyo had little sway in the c=
urrency market. At Japan's news conference President Bush and PM Koizumi sp=
oke about the non-performing loan and deflation problems hurting the Japane=
se economy. But the only movement came after Bush said he and Koizumi had s=
poken about "devaluation," confusing it with deflation, and sending USD/JPY=
 spiking higher. JPY fell to a day's low of 132.85 against the dollar and 1=
16.00 against the euro following the remarks. But markets quickly adjusted =
for the gaff and currencies are expected to remain steady today with no key=
 data from the Eurozone and a Federal holiday in the US.  President Bush sa=
id he saw signs of a US economic recovery but maintained that Japan needed =
to stay vigilant about structural reforms. PM Koizumi repeated his pledge t=
o tackle deflation and prevent a financial crisis. He also defended his adm=
inistration's progress on reform, saying tough measures cannot be completed=
 in only one year.   However, the market was disappointed by Japan's shying=
 away on the injection of public funds into the troubled banking sector. Th=
e Nikkei rallied from 18-year lows this month following reassurances from t=
he government that they stood ready to give troubled banks money. But today=
 Japanese ministers again played down the need for any such action saying t=
hey saw no risk of a financial crises. Banking analysts were less certain, =
saying a bailout is inevitable given the precarious position of falling rev=
enues and rising problem loans.  In the meantime, USD/JPY will remain const=
rained by repatriation flows back to Japan ahead of the March 31 book closi=
ng. Afterwards, the yen is likely to come back under pressure as Japan begi=
ns to tackle deflation and prevent a financial crisis.  There is no key dat=
a from the US today as the market observes a Federal holiday. Trading is ex=
pected to be thin.  =09[IMAGE] Audio Mkt. Analysis JPY, EUR rebound vs USD =
      Articles & Ideas  GBP: Old Lady Faces Old Problem   Euro Rally Runnin=
g Out of Steam       Articles & Ideas Forex Glossary   Economic Indicators =
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