• USD: Higher, doubt about Greek rescue plans, sovereign rating worries, weaker crude
    • JPY: Lower, BOJ ease speculation, China’s PM says Yuan is not undervalued
    • EUR: Lower, no quick fix for Greece, employment growth declined
    • CHF: Lower, producer import prices drop, intervention threat rising as CHF trades at 17 month high vs. EUR
    • GBP: Lower, election polls suggest a hung parliament, ratings downgrade risk
    • CAD and AUD: AUD & CAD lower, China's PM warns of the risk of the double dip global recession

    Overview

    The USD is trading higher to start the week supported by uncertainty about a rescue plan for Greece and fresh concern about sovereign debt ratings. A number of EU finance ministers state that they do not see the need for Greek aid plan at this time. Moody's says that the UK and US are moving closer to risk of losing their AAA sovereign debt ratings but their ratings are safe for now. EUR was also pressured by report of weaker Q4 employment. GBP was pressured by the latest UK election poll which suggests that the UK general election will not produce a government with a parliamentary majority. This increases the risk of a hung parliament and may diminish the chance that the UK will take quick action to reduce its deficit. JPY traded lower pressured by speculation the BOE will elect to expand quantitative ease at this week's BOJ policy meeting. The BOJ is under significant pressure from the Japanese government to take action to combat deflation and there are reports that the BOJ may also consider easing policy to try to weaken the JPY. Commodity currencies traded lower with the AUD pressured by a statement from China's PM Wen warning of a possible risk of a double dip for the global economy. CAD traded lower pressured by weaker crude. US economic data was mixed with the Empire manufacturing survey posting a modest decline and industrial production and capacity use came in close to market expectations. Focus turns to the Fed policy meeting on March 16th. No Fed policy change is expected. Investors will be looking to see whether the Fed makes any changes in its policy statement in regard to the language of “extended period” for low rates.

    Today’s US data:

    March Empire State Manufacturing came in at 22.86, a reading of 22 was expected. March industrial production rose by 0.1%, as expected. March capacity use rose to 72.7, a reading of 72.6 was expected.

    Upcoming US data:

    On March 16th February housing starts and building permits will be released along with February import prices. Housing starts are expected at 580k compared to 591k last month and building permits are expected at 610k compared to 621k last month. Import prices are expected flat. On March 17th February PPI will be released expected at -0.2% compared to 1.4% last month. On March 18th February CPI will be released expected at 0.1% compared to 0.2% last month. Q4 current account, initial jobless claims for week ending 03/13, leading indicators for February and March Philly Fed will also be released on March 18th. The current account is expected at - 120bln compared to -108bln last quarter. Initial claims are expected at 457k compared to 462k last week. Leading indicators are expected to rise by 0.2% compared to 0.3% last month. Philly Fed is expected at 18 compared to 17.6 last month.