The dollar remained in a holding pattern versus most major currencies Monday morning in New York as traders geared up for a busy week of economic data and the results of the U.S. government's stress tests on banks.
While equities markets have been reflecting optimism that the global economy is on the mend, the European Commission in its Spring forecast projected a 4% contraction in European Union's GDP this year. Also, the economy is not expected to regain momentum until 2010, despite the impact of fiscal and monetary stimulus measures.
Back in the US, data on pending home sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. The index is likely to remain unchanged in the month.
At the same time, the Commerce Department's construction spending report is expected to show a 1.4% decline in spending for March.
Kansas City Federal Reserve Bank President Tom Hoenig is scheduled to present a luncheon address on the financial crisis in New York at 12:30 PM ET on Monday. Richmond Federal Reserve Bank President Jeffrey Lacker is due to deliver a speech on the economic outlook to business and banking executives in Charlottesville, Virginia at 2 PM.
The dollar firmed up a bit versus the euro Monday morning, improving about a penny to 1.3260. The buck came under some pressure versus the euro last week, slipping to a multi-week low of 1.3385 before finding support.
The pace of decline in Eurozone manufacturing activity slowed in April, reports said Monday citing data from the Markit Economics.
The purchasing managers' index, or PMI, rose to a six-month high of 36.8 in April from 33.9 in March. It was also an increase from the initial estimate of 36.7.
The dollar managed to eke out gains versus the sterling in quiet dealing, with London markets closed for public holiday. The dollar improved to 1.4875, up from a nearly 3-week low of 1.4979, set in overnight trading.
Tokyo was also closed for holiday, and the dollar/yen pair was predictably little-changed, with no first-tier economic data from the US or Japan to consider yet. The dollar held onto last week's strong gains, staying near 99.50 yen.
Meanwhile, the buck was able to pare some of its big recent losses versus the resource-linked loonie, which has been bolstered by rising metals prices. The dollar climbed to 1.1900, a penny improvement from last night's January highs near 1.1800.
In financial news, Citigroup Inc. (C) and Bank Of America Corp. (BAC) are working on plans to raise more than $10 billion each in fresh capital to meet the requirements of the U.S. government's stress tests on banks, the Financial Times reported Sunday.
Citing people close to the situation, the report said these two banks and at least two other lenders are trying to convince the U.S. government that the findings of the stress tests were too pessimistic and that they do not need to bolster their balance sheets.
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