USD strengthened across the board at the beginning of the week, but kept its leading positions only versus its European opponents. Weaker than expected US employment data, which came in on Monday produced negative impact on the dollar, so it slipped versus the yen at the end of the week. As for the US economic statistics, it came in mostly positive – February industrial orders climbed + 2.0% y/y, manufacturing activity accelerated, activity in the services sector slowed, but stayed within positive trend above 50.0. Jobless claims slipped by 16 K, ADP private jobs came in better than expected in March. Only US employment report turned out disappointing – new jobs added 120 K in March instead of the expected 207 K. Unemployment rate slipped to 8.2% versus the previous 8.3% in February. Turning to this week, quite a batch of significant indices are being released out of the US. IBD/TIPP economic optimism index for the month of March is likely to improve from 47.5 to 49.1, February wholesale inventories are expected to increase by 0.5% m/m versus 0.4% m/m in January. Trade deficit should narrow to -51.9 bn after -52.6 bn dollars in January. These positive results may bolster the dollar. On the other hand, pessimistic inflation data with PPI slowing down to 0.3% m/m, 3.0% y/y versus 0.4% m/m, 3.3% y/y earlier may upset the market. Consumer price index is expected to come in at + 0.2% m/m, + 2.6% y/y versus +0.4% m/m, +2.9% y/y in February. Of interest will be Fed’s Beige Book with the information from the regions. Fed speak is likely to be heavy this week and the market hopes to hear any hints on possible QE3.


The euro was pressured versus the dollar for the whole last week except for the last trading day, when the 17-nation single currency managed to register a small profit. Negative sentiment towards the euro was triggered by resurfacing European debt concerns on the back of Spanish auction results, where bond yields hit their highest level since January maximum. As for this week, euro zone economic calendar looks to be quite poor in significant events. Industrial production index is being released for the month of February, most likely with further decline by -0.2% m/m, -1.7% y/y after +0.2% m/m, -1.2% y/y. Final Consumer price index is also being released this week, most likely with no changes . EU data front won’t be supportive of the euro, so negative sentiment may keep on. However, a decline may halt as well if investors decide to book their profits.


British pound slipped against the dollar last week, but less than the euro. Increasing risk aversion might have been the reason for the sterling’s sell. Some UK data came in quite optimistic, bolstering the currency – all PMI indices registered growth, NIESR reported the country’s GDP is likely to post 0.1% in the first quarter, giving no signs of recession. Manufacturing production slipped 1.0% m/m. On an annual basis the index posted 1.4% y/y. Industrial production registered 2.3% y/y. BoE kept its asset purchase at 325 bn pounds and its benchmark rate at 0.50%. This weak doesn’t cover a lot of significant indices. Investors will be only looking at trade balance figures – trade deficit is likely to widen from -7.5 to – 7.6 billion pounds in February. Annual PPI, both input and output prices declined, which gives reasons to expect inflation to fall towards 2.0% target level and indicates further possible policy softening.


Japanese yen traded within narrow ranges last week, but managed to register climb versus the dollar at the end following US pessimistic labor report. The upcoming week will be rich in significant events – machinery orders are likely to shrink -0.7% m/m, 3.0% y/y in February versus the previous 3.4% m/m, 5.7% y/y. Money supply should remain without changes, corporate prices are expected to slip 0.4% y/y in March after 0.6% y/y earlier. Bank of Japan interest rate decision will be in the spotlight this week and market will be looking forward to hear news on further quantitative easing. As for today, most indices have been already released – February current account surplus totaled 1177.8 billion yen after 437.3 bn earlier. Current assessment indicator increased to 51.8 in March after the prior 45.9, while forecasts anticipated 46.6. Speaking of the yen’s outlook, rising risk aversion can make the yen even more attractive as a safe haven asset.

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