- USD slid against most majors with the exception of commodity currencies
- EUR rebounded from a four-month low despite the tighter controls in Cyprus banks
- Commodity currencies loss some ground as the AUD weakened while CAD and NZD held steady against the USD
USD – The US dollar slipped against most majors with the exception of commodity-linked currencies –CAD and AUD, on the back of rather meager GDP, initial jobless claims and Chicago PMI. Gross domestic product for Q4-2012 rose at a 0.4% annual rate, following a 3.1% pace in Q3. However, the rate was down from Reuter’s poll of 0.5%. The expansion was also the slowest since Q1-2011 and far from what is needed to fuel a drop in the unemployment rate. Meanwhile, more Americans than projected filed for unemployment benefits last week, decelerating the recent progress in the labor market. First time jobless claims rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month. The Chicago purchasing managers’ index business barometer fell to 52.4 in March from 56.8 the prior month, slightly behind economists' expectations for 56.5. Analysts anticipate next week's ISM factory data as the index behaves highly similar to the Chicago headline, having a strong start this year after finishing last year on a lower note. A slide in the ISM index would suggest a slump in business activity, comprising of new orders, production, deliveries, inventories, employment and prices in the US.
EUR – The euro rebounded from a recent four-month low against the dollar, despite the continued fret about the consequences of the Cyprus bailout and political concern in Italy. Month-end flows showed investors covering bets against the euro as Cypriot banks re-opened for business for the first time in two weeks under tight controls to prevent a run on deposits. Although these control measures prevented a rush of outflows from Cypriot banks, the restriction from the free flow of cash in Cyprus may be unhealthy for the European bloc. The EUR is headed for a first quarter dip of 3% against the USD, its first decline since the second quarter of 2012.
GBP – Sterling rose against the dollar as British consumer morale held steady for a third straight month in March. According to a survey by market researchers GfK NOP, consumer confidence index came in at -26, unchanged from the previous two months and largely in line with analysts' expectations for a reading of -27. The series has been running since 1974 and hit a record low of -39 in July 2008. The positive trend suggests that Britain’s public mood towards the economy has been resilient, improving more over time.
JPY – The Japanese yen gained on the dollar after talks that repatriation of flows by Japanese investors will be at play by the end of the first quarter on March 31. That gave the currency a reprieve after it saw a period of sustained weakening ahead of the new governor Haruhiko Kuroda's first policy review on April 3-4. Some analysts would state that the heightened expectation of an aggressive-easing policy by the BoJ has already been priced in, and that the risk of a disappointment at the meeting next week is highly probable. A lackluster event could hold the yen steady under the 94 yen level, but a bolder than expected announcement from the new governor may boost the yen over the 95 yen level after the BOJ policy meet.
Commodity Currencies – The Canadian dollar was little changed against the US dollar after data showed that Canada’s economy grew at a higher-than-expected 0.2% in January with solid data in manufacturing and mining. Data showed the rebound was contributed by manufacturing which expanded 1.2%, while mining was up 0.2%, and wholesale trade was up 0.7. The Australian dollar slightly weakened against the greenback while the New Zealand dollar held steady staying on track for its best performance in 8 months with a stronger than expected Q4 GDP report. However, commodity currencies are on edge as worries about Cyprus and Italy remain. Australia and New Zealand markets will be closed on Friday and Monday due the Easter holiday.
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