The dollar continues to struggle across the board amid lingering fears that the economy is headed toward a recession – dragging the currency to a new all-time low against the euro at 1.5275 and a three-year low versus the yen at 102.62. Further, what may be more disconcerting for currency traders are heightened expectations for the Fed to aggressively cut rates on March 18th – with Fed funds futures currently pricing in a 74% probability of the FOMC slashing interest rates by 75-basis points to 2.25%. Given the heavy slate of US reports this week, we look for the greenback to remain mired near its lows.

Manufacturing continues to be the Achilles heel for the economy. The reports released today revealed further deterioration with manufacturing showing contraction in February as the ISM manufacturing survey fell beneath the key 50-level to 48.3, albeit slightly less than calls for a larger decline to 48.0. Meanwhile, construction spending plunged by its largest amount in 14-years down by 1.7% in January versus a 1.1% drop a month earlier.