• USD: Higher, flight to safety on report that the US rejects additional bailout money for GM and Chrysler
  • JPY: Higher , supported by rising risk aversion, falling global equity markets, industrial production falls
  • EUR: Lower, EU business sentiment falls to record low, Spain conducts first bank rescue since 1993
  • CHF: Lower, downside limited by safe haven gains in cross trade, SNB expected to defend 1.51 EUR/CHF
  • GBP: Lower, tracking weaker equity markets, CBI forecasts more job losses in the financial sector
  • CAD and AUD: AUD & CAD lower, pressured by rising risk aversion and lower crude oil prices

Overview

USD and the JPY traded higher supported by rising risk aversion and falling equity markets sparked by news that the US task force has rejected additional bailout money for GM and Chrysler. If GM and Chrysler do not take significant measures to restructure there is a possibility these auto makers may wind up in bankruptcy. The USD was also supported by safe haven flows inspired by news that Spain took action for the first time since 1993 to support troubled Spanish banks. EUR was pressured by report that EU March business sentiment dropped to a record low. GBP was pressured by report from the CBI that the UK financial services industry may cut up to 25% of the workforce in Q2 to 2009. The commodity currencies were pressured by weaker CRB and rising risk aversion as global equity markets trade lower on the news that the US automakers will not be getting fresh bailout money. For the past two weeks optimism about a potential bottom in the US economy coupled with China's proposal to replace the USD with a sovereign reserve currency tied to the SDR of the IMF pressured the USD. Late last week and into the start of this week's trade optimism about the US and global recovery has been dented by fresh selling pressure in global equity markets and uncertainty about the global economic outlook. The USD has re-emerged as the safe haven currency of choice with the JPY also attracting safe haven demand.

This week’s US economic calendar includes the March 31st release of March Chicago PMI expected at 34 compared to 34.2 last month. March consumer confidence will also be released on March 31st expected at 28.5 compared to 25 last month. On April 1st, February Pending Home sales will be released expected at 78.1 compared to 79.5 last month. March domestic auto sales will also be released on April 1st expected at - 6.5%. On April 2nd, initial jobless claims for week ending 3/28 are due for release expected at 650K. Factory orders for February will also be released on April 2nd expected at -1.1% compared to -1.9% last month. On April 3rd, March nfp will be released expected at -605K compared to -651K last month. March unemployment is expected to rise to 8.4% from 8.1% last month.