- Sluggish retail sales data softens GBP
- Euro steadies, though remains vulnerable to Eurozone growth concerns
- U.S. dollar under pressure from weak U.S. data
USD – The dollar slid against the yen and euro after a gauge of future US economic activity fell in March for the first time in seven months while growth in factory activity in the U.S. mid-Atlantic region unexpectedly slowed, adding to worries the short-lived recovery has stalled. The Philadelphia Federal Reserve Bank said its business activity index dropped to 1.3 from 2.0 the month before. That was shy of economists' expectations for 3.0. The data is seen as one of the first monthly indicators of the health of US manufacturing leading up to the national report by the Institute for Supply Management. Analysts said investors remain sensitive to signs of economic weakness despite the market's recovery.
EUR – The euro edged up vs. the USD, remaining above key support levels at $1.30, though it remained vulnerable after falls the previous day on talk of more monetary easing by the European Central Bank. Though the recovery is fragile, a day after posting its biggest daily drop in 10 months, the euro’s gains may be short-lived on the back of comments by ECB Governing Council member Jens Weidmann. He was quoted by the Wall Street Journal as saying the bank could ease further if economic data warrants it. Analysts remain skeptical about how negative these comments would be for the euro. Unlike Japan and the United States, the ECB is not printing money via quantitative easing, which tends to weaken the currency. Market participants believe a rate cut could be positive for the Eurozone growth outlook. However, worries about the Eurozone's growth outlook and about the potential for a flare-up in the Eurozone debt crisis meant any gains for the euro would be limited. Investors will keep an eye on Italy’s presidential elections which begins today and the Cyprus bailout which is still not completely resolved.
GBP – Sterling slipped against the dollar, on sluggish retail sales in Britain that painted yet another bleak picture for the economy and kept alive chances of more monetary stimulus. BoE senior policymaker, Weale commented that cooling inflation and the risk of a contracting GDP in Q1 may open barriers for more stimulus. Further easing is likely to begin in July, as Carney takes over this year. Sterling purchases remain dismal as markets await the release of the initial official estimate of UK first quarter gross domestic product data being released next Thursday.
JPY – The yen held steady against the USD, though market participants still expected it to push lower due to aggressive monetary easing in Japan. Its losses were expected to slow as the dollar faced stiff chart resistance before the 100 yen mark. Yen movement may also be slowed against the backdrop of the G20 and the IMF meetings over the next several days and what statements and criticism are released.
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Commodity currencies – The CAD strengthened against the USD today as global equity and commodity markets recouped after this week’s heavy losses. Canada’s annual CPI inflation rate due tomorrow will be the primary focus on whether or not the BoC will raise interest rates anytime soon. However, market participants believe a spike in the CPI data will not change the BoC’s decision to raise interest rates. Traders are watching for further hints on monetary policy from BoC governor Mark Carney today when he participates in the Reuters Newsmaker event in Washington. The AUD strengthened against the USD as gold prices rose after hitting two-year lows earlier this week. Supporting the AUD’s strength today are other precious metals which also rode on the gold’s gains, with silver up 0.4%, platinum up 0.3%, and palladium up 0.4%. Market participants expect the AUD to remain in its recent ranges until the release of domestic CPI data due next week.
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