Daily Summary on USD, EUR, JPY, GBP, AUD, CAD and NZD

JPY strengthened against the USD after the inauguration of new BoJ Deputy Governors yesterday

Commodity currencies strengthened after better data from CAD and NZD

USD – The US dollar is broadly weaker against most major currencies with the exception of the EUR after markets reduced concerns of a Cyprus meltdown. Domestically, fewer Americans than forecast filed claims for unemployment last week, signaling the US labor market is maintaining its recent progress.  Applications for jobless benefits increased by 2,000 to 336,000 in the week ended March 16. The Federal Reserve Bank of Philadelphia’s general economic index rose to 2 in March from -12.5 the prior month.  Readings lower than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Meanwhile, sales of previously owned US homes rose in February to its highest level in more than three years. Purchases increased 0.8% to a 4.98 million annualized rate, the most since November 2009. In addition the index of US leading indicators rose more than forecast in February, indicating the world’s largest economy is strengthening.

EUR – The euro fell against most currencies after surveys showed a struggling euro zone economy, with softer-than-expected German business activity, casting doubts about a recovery in Europe's largest economy. The Flash Eurozone Composite Purchasing Managers' Index, which makes up around 85% of the final reading and is seen as a reliable economic growth indicator for the bloc, fell to 46.5 in March from February's 47.9. That was lower than economists had forecasted of a 23 reading and far short of the median expectation of 48.2. The index has been below the 50 mark for all but one of the past 19 months. In addition, Markit's surveys reported that Germany is also showing signs of fatigue with composite PMI falling in March, although holding above the 50 line for the fourth month. But in France, the bloc's second-biggest economy, sank to a four-year low, signaling the lack of confidence in firms across the euro zone. Meanwhile, worries about a banking collapse in Cyprus simmered down. However, Cypriot politicians are searching desperately for a second plan to find billions of euros to secure a European Union bailout. Confirmed reports state that Cyprus has also been seeking an alternative loan deal from Russia, which has calmed markets but has raised concerns over a conflicting double-taxation between the two nations, which would make Cyprus less attractive for Russian investment in the future. The euro fell to a trading day low of EUR/USD $1.2879, down 0.4% from yesterday’s close.

GBP – Sterling rose to three-week high against the dollar after better-than-expected British economic data eased some concerns about the economy's poor performance. Britain's public finances showed a smaller deficit than had been anticipated, while retail sales showed their strongest rise since March 2012, helping boost the currency higher. Deficit reduction is the central economic policy of Britain's Conservative-led coalition government. Since the figure came in lower than expected, it may decrease bets the BoE would ease monetary policy further in an attempt to shore up an economy threatened to slip into a triple-dip recession. Better economic data, coupled with minutes from the latest BoE policy meeting, which showed less support for further asset purchases, uplifted the pound.

JPY – Without any new developments after the inauguration of BoJ Deputy Governors Kikuo Iwata and Hiroshi Nakaso the Japanese yen rebounded against the dollar, despite better data from the US. The pullback in JPY suggests that the market may be beginning to change its course of a further weakening yen. USD/JPY is currently trading in the lower ranges of 95.00-96.00.

Commodity Currencies – Commodity currencies were firmer against the US dollar, helped in part by a strong reading of economic growth out of New Zealand, while Canadian retail sales reported moderate gains. Canadian retail sales climbed 1% in January while overall sales volumes used for calculating real GDP growth, were flat. Gains were reported in seven of 11 subsectors, representing 52% of total retail trade. Most notable sectors were sales at motor vehicle and parts dealers of 2.8% in January after a 6.5% plunge in December and sales at electronics and appliance stores of 2.3% after a 12.3% drop in December. The currency's commodities cousins, the Australian and New Zealand dollars, were both stronger overnight, with Australia also firmer on a surprisingly upbeat report on manufacturing in China, Australia's biggest export market.

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