• USD: Lower, durable goods and new home sales rise, Geithner open to SDR linked reserve currency
  • JPY: Higher, Japan posts its first trade surplus in five months
  • EUR: Higher, German IFO index falls, expectations component rises for third month in a row
  • GBP: Lower, HSBC to cut 1200 jobs , CBI retail sales drop sharply, downside limited by US stock rally
  • CAD and AUD: AUD & CAD higher, tracking equities

Overview

USD traded lower as US equity markets rally after the release of better than expected US durable goods and new home sales. US February durable goods rise 3.4%, a decline of 2% was expected. January durable goods report was revised down to a 7.3% decline from original report of the 4.5% drop. February home sales rise 4.7% to 337K, a reading of 300K was expected. The unexpected rise in durable goods and new home sales reduces safe haven demand for the USD. These reports suggest that the US economy may be nearing a bottom. USD decline accelerated in reaction to comments from Treasury Secretary Geithner that he is open to China's suggestion of moving towards a SDR linked currency system. On Monday, Chinese officials indicated that they would like to see the USD be replaced by the IMF’s SDR and create a super global reserve currency. USD downside was limited by additional comments from Treasury Secretary Geithner that the USD remains the world reserve currency and will likely remain so for a long time.

JPY traded higher despite report that Japan's imports and exports fell at a record pace. EUR rebounded from early losses supported by improvement in the expectations component of the German IFO business confidence index. GBP weakened versus the JPY and EUR, pressured by report that HSBC plans to cut another 1200 jobs and UK CBI retail sales fell sharply. Commodity currencies opened lower pressured by a dip in risk appetite as investors question whether the US plan to buy toxic bank assets will boost economic activity. The commodity currencies turned higher tracking the sharp rise in US equities and the report that Geithner would consider a global reserve currency.

On March 26th, US initial jobless claims for the week ending 03/21 will be released expected at 640K. On March 27th, final Q4 GDP will be released expected at -6.3%, along with February personal income expected at -0.1% compared to 1% last month and final March University of Michigan sentiment expected at 56.6.