Euro still on the back foot… and drop to 126.08 yen

Good Morning,

- Euro still on the back foot… and drop to 126.08 yen, depths not visited since June 2013 and the sixth straight session of losses.

- Asia took a breather after recent gains.

- ECB’s policymakers gathering on Wednesday will examine possible further emergency funding for Greece's banks as they take stock of a wider economic picture showing early signs of improvement. With falling prices in the euro zone beginning to stabilize, ECB President Mario Draghi will be able to claim an early success for the quantitative easing scheme -- money printing to buy chiefly government bonds -- launched by the bank in March.

- The Germany’s selling prices in wholesale trade decreased by 1.1% in March 2015 from the corresponding month of the preceding year. In January 2015 and in February 2015 the annual rates of change were –2.6% and –2.1%, respectively. From February 2015 to March 2015 the index rose by 1.0%.

- The U.S. AAA credit rating was affirmed by Fitch, which cited the strength of the nation’s economy, capital markets and status as the issuer of the world’s reserve currency. The U.S. budget deficit, which has narrowed from a peak of $1.4 trillion in 2009 to $483.3 billion in 2014, is expected to continue to shrink in 2015 and 2016, though reforms to mandatory spending and taxation measures will be needed to prevent increases after 2018, analysts wrote in a report. Fitch said the outlook for the rating is stable. Economic growth in the U.S. has been faster than that in most of the developed world.

- JP Morgan on EUR/USD: JPM forecast profile is unchanged this month and continues to show a slower decline for the rest of the year, after an unprecedented -11% drop in Q1. JPM's Quarter-end targets are 1.07 in Q2, 1.06 in Q3 and 1.05 in Q4. "Downside targets would be more aggressive were it not for the US dollar’s valuation problem and the Fed’s gradual pushback on a strong currency," JPM argues. EUR/USD’s fair value is about 1.12 (blue cell in table 1). The euro's current level near 1.06 would be justified if the ECB balance sheet were heading to €5trn (unlikely given how Euro area growth is improving). "So while we know that currencies can undershoot for some time until a macroeconomic or policy catalyst emerges, we are reluctant to forecast trend extensions that have little empirical basis," JPM argues. The upside risk to this view, according to JPM, could probably take EUR/USD towards 1.15 over the coming months.

- A surprise decision by Singapore's central bank not to ease policy gave a boost to emerging currencies in the region.

- Australian business sentiment and conditions appeared to have picked up in March, according to the latest monthly National Australia Bank survey, as the February cut to the cash rate fed through to housing and other non-mining activity. NAB's business survey, found a 3-point improvement in confidence, to 3 index points, and a 4-point lift in conditions, to 6. Both trading and profitability improved, and there was also a small uptick in employment, according to the survey.

- The latest NZIER Quarterly Survey of Business Opinion shows the New Zealand economy heading into 2015 in good shape. While the softening in activity indicators suggests a moderation in growth in the March 2015 quarter, annual growth is still expected to be respectable at just over 3%.

- Oil prices rose after the U.S. Energy Information Administration said it expected U.S. shale oil output to record its first monthly decline in over four years.

Have a nice Day!