The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3540 level and was supported around the $1.3385 level. The common currency tested a key short-term retracement level today, representing 50% of the March range. The pair gained ground even though there are significant doubts concerning the viability of Greece's plans to improve its massive fiscal deficits. The Greek government today indicated its May debt servicing needs will be around €11.6 billion. Greece's new bond issue this week was not entirely well-received by investors and dealers are concerned that a significant amount of more supply of sovereign eurozone debt with deteriorating credit quality could imperil the euro further. The yield on Greek ten-year debt has increased about 25bps since European leaders agreed to a financial aid package for Greece on 25 March and this evidences the market's discomfort with the country's severe problems. Data released in the eurozone today saw the EMU-16 February unemployment rate tick higher to 10.0% from 9.9%, as expected, while the March flash consumer price inflation estimate was up 1.5% y/y - its highest level in ten months. Germany posted its largest decline in jobless claims since August 2008 and the March unemployment rate fell to 8.0%. German February retail sales will be released tomorrow. French data released today saw February producer prices climb 0.1% m/m and 1.0% y/y. Despite today's increase in headline eurozone inflation, the rate is still below the European Central Bank's perceived comfort zone of 2.0% and given the backdrop of the sovereign credit crunch, a move higher in official interest rates is very unlikely for quite some time. ECB President Trichet said it is extremely important to anchor inflation expectations. In U.S. news, data released today saw MBA mortgage applications climb 4.3% in the latest week while February factory orders fell to +0.6% from a revised +2.5% in January. Also, March Chicago PMI fell back to 58.8 from the prior reading of 62.6. The most important data released today saw March ADP employment off 23,000, a slight improvement from the revised prior reading of -24,000. These data represent private sector job losses and some economists may scale back their forecasts for Friday's non-farm payrolls report with many forecasts currently focusing on job gains around 185,000. Atlanta Fed President Lockhart said he is watching for durable job gains while Dallas Fed President Fisher said the U.S. cannot ignore the impact of its massive deficit of yields. Fed Governor Duke reported U.S. banks remain weak and noted the decrease in bank lending is very troubling. Euro bids are cited around the US$ 1.3335 level.
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