TheFXSpot: Relief Rally Bolsters Risk Appetite; BOE, ECB Next 3  MAR   By Vicki Schmelzer NEW YORK, March 3 - A relief rally in the euro and other currencies, as well as in stocks and commodities, served to bolster risk appetite Wednesday. By Vicki Schmelzer NEW YORK, March 3 (MNI) - A relief rally in the euro and other currencies, as well as in stocks and commodities, served to bolster risk appetite Wednesday. The S&P 500 closed flat at 1118.79, after trading in a 1116.74 to 1125.58 range. Spot gold closed at $1139.75/oz, after trading in a 1132.80 to 1144.60. The break above last week's highs, as well as down-trend resistance from the January peaks, was deemed bullish for both instruments. The market expects a retest of the 2010 peaks posted mid-January of 1150.50 in the S&P 500 and $1161.50 in gold. The price gains seen earlier in the day, in stock, commodities and FX, were driven more by squaring/paring back of existing positions in response to a new Greek budget plan than by a new willingness to go long these instruments. The recent break of key technical resistance levels added to market optimism about risk friendly trades. In most cases, these gains were later retraced as players fretted event risk stemming from Thursday's Bank of England and European Central Bank meetings and Friday's release of U.S. non-farm payrolls. The BOE and ECB are expected to keep rates on hold and to offer insight into future monetary policy. In the case of the ECB, this may include the announcement of minor changes in its liquidity framework (see Market News International mainwire story at 10:05 am EST). However, traders saw more danger from Friday's U.S. jobs data than from the pending BOE/ECB decisions. Both the euro and cable posted solid gains Wednesday, driven partly by currency specific news and partly by an overall unwinding of risk averse positions. The euro was closing at $1.3700 and cable at $1.5105 Wednesday, on the high side of their respective ranges of $1.3594 to $1.3736 range. At the peaks seen earlier, the euro was up 2.3% from the nine-month plus low of $1.3432 posted Tuesday. Tuesday's lows marked the third time that the euro bottomed in the $1.3430/50 zone in recent weeks. The euro rally seen subsequently has been met with skepticism, with most market players still bearish and targeting a test of $1.3000 in coming weeks. Each trader had their own resistance level that would need to be broken decisively to become euro bulls, if only for the short-term, with some at $1.3800, some at $1.3850, and still others at $1.4000. With Greek bond spreads (vs German Bunds) narrowing to 280 basis points at one point earlier, levels not seen since February 11, it was not a surprise to see the euro rise also to levels seen mid-February. However, a return to the 2010 peaks of $1.4582, seen mid January, seemed doubtful and was clearly not on traders' radar screens. "Let's get to $1.40 and see where we go from there," said David Watt, senior currency strategist at RBC Capital Markets. This week, the market has become "fatigued" by Greek debt issues and has started to focus on other issues, such as firming global data, which has served to give the euro and other currencies a lift, he said. A meaningful rally in the euro seems untenable given the host of debt issues facing the peripheral countries. "There are more than enough cement shoes to weigh on the euro going forward," Watt said. "Even if we stretch up toward $1.45, there will be rumblings about Spain, or Portugal or some other (peripheral) country that will thwart any outbreak of optimism," he said. The "all-clear" has not yet been sounded on Greece's debt crisis, making it hard to call a bottom in the euro, said David Gilmore, economist and partner at FX Analytics in Essex, CT. "This won't happen until there is an explicit guarantee of Greek debt by all or some of the eurozone states," he said. The March 16 status report, where Greece reveals what measures have been implemented so far, will be key. The "Euro area is moving the goal line - help was conditional on a new and credible austerity plan... now it is dependent on implementation of said plan," Gilmore said. "Merkel risks becoming radioactive the minute the German tax payer in on the line for any support for Greece, and the French are no more sympathetic to a bailout for profligate, shadowy Greece," he said. In other currencies, cable benefited from positions squaring as the prospects of a large M&A deal (Prudential/AIG) that would have involved sterling selling faded. Cable was further supported by U.K. services activity data, which showed the headline services activity index rose to 58.4 in February, well above consensus at 55.5 and the highest levels since January 2007. The data set followed a strong CIPS manufacturing survey, which held steady at 56.6, matching January's level, the latter a 15-year high. Sterling stalled earlier ahead of 1.5177, the 38.2% retracement of the move from the $1.5816 highs (Feb. 17) to $1.4780 (March 1). Wednesday's release of ADP employment data, showing job losses of 20,000 for February created confusion heading into Friday's non-farm payroll release, with the ADP data purportedly not "snow-affected" in contrast to the BLS data. Later the employment component of the non-manufacturing ISM report rose 4 percentage points to 48.6%, creating renewed optimism for this week's jobs report. U.S. Institute For Supply Management's survey chief Anthony Nieves downplayed the importance of the 4 point jump . "As long as it's below 50, it's still wait and see. Respondents have a feeling of being snaked-bit in the past," he said in an interview with Market News. Thursday's weekly jobless claims will be closely eyed for insight into the U.S. employment situation. The median estimate in a Market News International survey of economists looks for claims of 475,000 for the week ending February 27. Estimates range from 460,000 to 490,000. The median estimate for Friday's non-farm payroll report looks for payrolls to fall by 50,000. Estimates range from -150,000 to +30.000. The U.S. unemployment rate is expected to increase by 0.1% to 9.8%. Estimates there range from 9.6% to 10.0%. ** Market News International New York Newsroom: 212-669-6430 ** [TOPICS: MNEF01] 3/3/2010 4:27:00 PM