Top Stories
- Euro hits highest rate in a month as auctions support
- GFK Consumer sentiment misses
- Nikkei up strong at 2.36% Europe up .79%
- Oil at $107/bbl
- Gold at $1695/oz.
Overnight Eco
- CHF UBS Consumption Indicator (FEB) 0.87 vs. 0.93
- EUR German GfK Consumer Confidence Survey (APR) 5.9 vs. 6.2
- GBP CBI Reported Sales (MAR) n/a
Event Risk on Tap
- USD Consumer Confidence (MAR) expected at 70
- USD Richmond Fed Manufacturing Index (MAR) expected at 18
Price Action
- USD/JPY stalled at 82.75
- AUD/USD inches towards 1.0550 on better risk flows
- GBP/USD just shy of 1.6000
- EUR/USD better auction propel to 1.3385
EUR/USD hit month to date highs in early European trade today propelled by better than expected results from the Italian bond auction as it extended its rally from yesterday to trade at a high of 1.3385. The pair continued to benefit from anti-dollar flows spurred by relatively dovish comments yesterday from Fed Chairman Ben Bernanke who signaled that US monetary policy is likely to remain highly accommodative for the foreseeable future given the relative slack in the labor markets.
Risk FX spent much of the early morning trade treading water with EUR/USD consolidating its gains near the 1.3350 level, but the pair popped up to 1.3385 on a burst of buying from model funds in the wake of strong Italian bond auction that saw yields on the 7 year drop to 3.06% from 3.19% the period prior. The bid to cover ratio also rose to 1.91 from 1.85. The Italian auction results along with the solid uptake in Spanish bonds show that credit fears have eased significantly in the region – a welcome sign to European fiscal authorities given the massive amount of financing coming up for the EZ peripheral economies over the next few months
On the economic front the data was somewhat mixed with French consumer sentiment rising to 87 from 82 the month prior but German GFK survey showing a surprising contraction. German GFK Consumer sentiment survey dipped in March dropping to 5.9 from 6.0 the month prior and considerably below 6.2 forecast. This was the first drop after a six consecutive months of increases as income expectations of German consumers deteriorated sharply.
The decline in income expectations was driven by the strong increase in energy prices as WTI oil approached the $110/bbl earlier in the month. The ongoing wage negotiations also added to uncertainty and consumer angst.
On positive note consumers economic expectations rose to 7.2 from 5.9 points after the Greek bailout deal was concluded, easing concerns about the credit market stress in the region. Yet the consumer's propensity to buy also slipped lower to 38.6 from 39.2 the month prior. Overall, the slightly worse than expected German GFK consumer sentiment indicates that retail spending is likely to remain cautious as higher oil prices and labor uncertainty weigh consumer’s minds.
In North America today the focus will remain on Fedspeak with both Dudley and Bernanke scheduled to speak. Both men are viewed as doves so any further emphasis on monetary easing could push the dollar lower as the day proceeds especially if the latest batch of data including the Case Schiller housing index and the Consumer Sentiment survey miss their mark undermining the US recovery thesis.
FX Upcoming
| USD | 14:00 | 10:00 | Consumer Confidence (MAR) | 70 | 70.8 |
| USD | 14:00 | 10:00 | Richmond Fed Manufacturing Index (MAR) | 18 | 20 |
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