USD – The US dollar is mixed this morning as global markets reopen following the Easter holidays. New orders for U.S. factory goods rose in February but a gauge of planned business spending slipped, suggesting factory activity continued to expand at a modest pace. The U.S. Commerce Department said orders for manufactured goods climbed 3.0%, mostly boosted by the aircraft industry. U.S. housing agency, Fannie Mae reported profits of $17.2 billion for its recent fiscal year, lending credence to a recovering housing market. Investors will remain focused on the outcomes of Central Bank meetings in the U.K., euro zone and Japan for the remainder of the week. U.S. non-farm payrolls data is also under the microscope for Friday, as analysts continue to seek signs of a US recovery.
EUR – The euro slipped against the dollar and yen, pressured by euro zone data showing the region was well into contraction territory, with expectations of euro zone fundamentals deteriorating further. This has prompted expectations European Central Bank President Mario Draghi would strike a more dovish tone at Thursday's monetary policy outlook meeting and could provide hints about a possible rate cut. The euro is trading within sight of last week’s four-month low of $1.2750. Euro zone purchasing managers' surveys added to concerns about the single currency's outlook by showing a deepening decline in manufacturing activity in March, with Italy and Spain particularly weak. The euro zone's unemployment rate rose to 12% in February, which analysts said was a record high. With economic weakness now endemic across the euro zone, economists said they expect further bailouts for other euro zone countries, with Spain and Slovenia topping the list of likely candidates. Investors were also cautious before Thursday's ECB meeting. Although interest rates are expected to be left on hold, analysts saw a small chance of a cut.
GBP – The pound deepened its weakening trend after British economic data continued to disappoint, keeping alive the risk of another recession with analysts expecting further weakness in the currency over the coming weeks. Britain's Purchasing Managers' Index (PMI) for manufacturing activity rose to 48.3 from the previous 47.9, but was still below the 50 level which separates growth from contraction. Data released by the Bank of England showed mortgage approvals had fallen for a second month, hinting at signs of weakness in Britain's key housing market. Against the euro, the pound had gained in recent weeks on growing concerns about the banking crisis in Cyprus, coupled with the political situation in Italy, drove some foreign investors to discard euro zone assets in favor of sterling. Analysts note that any gains in sterling would prove fleeting, given the bleak economic outlook and also the risk that Britain could lose its coveted triple-A credit rating from another agency.
JPY – The Japanese yen has made quite a move throughout the day, trading earlier at one-month highs against the dollar though it reversed these gains as the USD climbed to a session high as investors braced for the outcome of this week’s BoJ meeting. Analysts say that the yen may recover further against the dollar over the next few days though investors will likely try to sell it at higher levels ahead of the BoJ policy meeting April 3-4. The BoJ is expected to boost its bond buying and to extend the maturities of its JGB bonds beyond 3 years.
Commodity Currencies – The Australian and New Zealand dollars held steady following the Reserve Bank of Australia’s decision to leave its interest rates unchanged, as was widely expected by markets. The Canadian dollar strengthened to a one-month high against the USD, helped by a positive outlook for North American equities and weaker than expected U.S factory data.
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