The dollar trade higher against the euro

Good Morning,

- The dollar trade higher against the euro early on Tuesday, in thin trade as several key financial centers shut for holidays. The dollar index edged up to a high of 95.94, pulling further away from a two-month low of 94.399 plumbed on last Thursday.

- Asian stocks extend losses as the region's growth falters in the face of slowing demand from China.

- Yields on 10-year German bunds climbed again in levels last seen before the ECB began buying bonds earlier this year.

- Fed’s Charles Evans: Rate hikes could begin this year, although with inflation uncomfortably low and the unemployment rate still too high, the Fed should hold off on raising rates until early next year.

- Bank of America on EUR/USD: "The path for the Euro going forward is likely to be more volatile. The sharp drop of the Euro since a year ago was from an overvalued level, which is not anymore the case. The ECB’s open-ended QE was a positive surprise that contributed to the EUR weakness, but strong Eurozone data more recently has forced the ECB to keep pushing against expectations for early QE tapering. While markets were expecting ECB QE for years to come to avoid a Japan scenario, they now doubt whether QE will continue after September next year," BofA notes. "Going forward, further Euro weakness has to be the result of better relative data in the US and continued divergence of monetary policies as the Fed starts hiking rates. Therefore, the risks for the Euro will be more balanced, as indeed we have seen in recent weeks. The intra-day range of EUR/USD movements has also widened considerably," BofA argues. ‘’We remain bearish EUR/USD for the rest of the year, as monetary policies diverge. The long-term equilibrium of EUR/USD is higher because of the Eurozone’s current account surplus. However, the short-term equilibrium is low because of the different positions in the business cycle that force the ECB to continue with QE and the Fed to hike rates (Sep this year or later according to our US economists). The long-term equilibrium once both economies have closed their output gaps and monetary policies are neutral will be higher ’’.

- Australia cut interest rates to a fresh record low in response to a weak economic outlook and to discourage further strengthening in the currency. Governor Glenn Stevens lowered the key rate to 2 percent from 2.25 percent. Policy makers warned last month that investment in industries outside mining, which were supposed to pick up slack in the economy, could fall.

- The Australian dollar fell a quarter of a cent initially after the announcement , but then quickly rebounded as investors bet the RBA's current easing cycle might now be over.

- Australia's trade deficit has missed expectations in March, largely due to sagging prices for iron ore and coal exports. The nation's trade deficit narrowed a seasonally adjusted 18 per cent to $1.32 billion.

- Brent oil hit a 2015 high before slipping as Saudi Arabia considered halting bombing in Yemen to allow the delivery of aid, which eased concerns about oil supply from the Middle East.

- Oil supply and demand don’t fully justify the 60 percent drop in prices between June and January as speculation also played a role, OPEC said. A rise in supply from outside the Organization of Petroleum Exporting Countries at a time when demand for oil was weak was the main reason for the drop, OPEC said in its monthly bulletin on Monday. Brent oil, benchmark for more than half of the world’s crude, tumbled from mid-June to a six-year low in January as U.S. output climbed to the highest level in more than four decades and OPEC members pumped more barrels.

Watch today: Euro zone Producer Price Index, US store sales, US ISM services.

Have a nice Day !