The European Central Bank has already announced that it is leaving its benchmark interest rates unchanged on Thursday. The euro is now struggling to maintain any positive momentum as bulls have to sit through the next few hours waiting to hear whether its President Jean-Claude Trichet is set to take a tougher line on inflationary pressures around the region that are ahead of the Bank's policy target. A sharp slowdown in China's services sector last month has also lifted some of the market's worst fears that the world's number two economy is still set to keep tightening policy in order to dampen growth.
U.S. Dollar - The dollar index has bounced somewhat from a midweek four-month low after the Fed concluded in its Beige Book survey that the economy was rebounding quite well. Labor market conditions were improving it said, inspired by strong gains in retail sales and robust manufacturing. The index today stands at 76.70. Investors are also eager to learn whether initial claims for unemployment insurance can sustain a decline beneath the critical 400,000 mark in today's report. It has done so for three out of the last four weeks and is the final reading ahead of Friday's February non-farm payrolls report in which we can expect to find far less distortion on account of the weather. Investors will also learn whether or not the services sector managed to expand from a six-year high in an ISM non-manufacturing report later today. The January reading was 59.4 with expectations ahead of today's report looking for a minimal dip.
British pound - The pound was tripped up on Thursday by a disruption to expansion in the service sector with the PMI reading falling short of expectations at 52.6 from 54.5 in January. The pound lost sight of $1.6325 and reached a session low following the ECB decision to maintain stable policy falling to $1.6258. An earlier construction PMI survey had propelled the pound this week reaching its strongest reading in eight months. The turning point in that data series coincides with the onset of weakness in the Hometrack Housing survey, which continued to display weakness in house prices. The series showed a 0.2% decline on the prior month leaving houses 2.7% lower than a year ago. The data conflicts with findings at the Nationwide building society earlier in the week. All in all investors had less reason to keep chomping at the bit hoping that the Bank of England could be pressured into tightening monetary policy. Earlier this week Governor King told lawmakers that it would be self-defeating to raise interest rates in gesture to fight inflation. The pound eased against the euro, which today buys 85.13 pence.
Aussie dollar - China's non-manufacturing PMI jumped during February from expansion to contraction landing at 44.1 from 56.4. The data was less evident but clearly notable in the HSBC series, which fell from 52.0 to 51.9. Domestic exports of Australian iron ore and coal also fell in January confirming signs of a downturn at the edges. The Aussie was remarkably steady on the news, perhaps buoyed by rising global equities, which helps put demand for riskier propositions back on the agenda. Nevertheless the news was not pretty domestically. Building approvals fell during January by 15% for the largest slide in nine years. Overall exports slid by 4% while the service sector maintained its contraction albeit at a lesser pace. Prime Minister Julia Gillard warned over the strength of the Aussie dollar and its impact on non-mining affairs where it was clearly causing a dampening effect. The Aussie rose to daily high at $1.0185 despite today's data.
Japanese yen - It's another quiet session for the Japanese yen. Asian units made gains against the dollar although the yen is typically making bullish gains against the dollar when risk aversion comes into play. With little exciting data to report the yen trades at ¥82.00 per dollar. Fourth quarter capital spending missed expectations and grew by 3.8% and down from a 5% pace.
Euro - As the world awaits a potential rhetorical shift from the ECB, some hope that the central bank is set to prepare the stage for a mid-year tightening of monetary policy. However, there remain risks from the omnipresent sovereign debt crisis and data today showed that the services sector in both Germany and across the region came off the boil. The February services PMI report came in at a sub-par 56.8 from a January showing of 57.9. Yet strength in retail sales data for January helped offset the negative tone. Across the Eurozone sales at retailers gained by 0.4% on the month and grew 0.7% year-on-year. The report proved a strong turnaround from declines witnessed in December when harsh weather diverted the attention of consumers. The euro sits at $1.3850 ahead of the Frankfurt press conference.
Canadian dollar - With no data on the horizon for today and crude oil now trading beyond a triple-digit price, the loonie remains firm and buys $1.0275 U.S. cents.