DAILY FOREIGN EXCHANGE MARKET SUMMARY

In other news, oil rose towards $43 per barrel supported by better economic news from China and speculation that OPEC may further cut output. A senior Chinese planning official indicated the Chinese government will increase spending in areas such as infrastructure and manufacturing on top of the 4 trillion yuan ($585 billion) stimulus package that was unveiled in November.

The euro weakened against the dollar overnight, but was able to recoup some of those losses in early morning trading. The euro initially weakened against the dollar when Australia’s economy unexpectedly contracted in the fourth quarter, spooking investors to move away from the euro and into the relatively safe dollar. On the data front, Markit Eurozone Purchasing Manager’s Index for the service sector fell to new record lows of 39.2 in February which is well below the 50.0 mark that divides growth from contraction.

Markets are awaiting tomorrow’s ECB and BoE meetings for additional direction.

The British pound strengthened against the dollar after better than expected data, but those gains were capped ahead of Bank of England’s meeting tomorrow. The purchasing managers’ index for the UK services sector unexpectedly rose to 43.2 in February indicating a pick-up in UK consumer confidence.

The Japanese yen weakened against the dollar as investors, worried over Japan’s struggling economy, sold yen. Bank of Japan’s board member Miyako Suda presented a gloomy outlook on Japan’s economy and said the central bank must act flexibly if downside risks materialize.

The Canadian dollar strengthened against the US dollar as oil climbed towards $43 a barrel. As commodity prices rise, the loonie, which is heavily commodity based, strengthens against the greenback.

The Australian dollar and New Zealand dollar weakened against the US dollar overnight after data showed the Australian economy shrank 0.5 percent last quarter for the first time in eight years. The unexpected contraction in the economy puts pressure on the Reserve Bank of Australia to cut rates at its April 7th meeting. However, both the Aussie and the kiwi erased some of their losses as the US private sector data and non-manufacturing data was released this morning.

Indicative rates:

EUR/USD 1.2630

USD/JPY 98.75

GBP/USD 1.4178

USD/CAD 1.2814