Forex Major Currencies Outlook (March 27, 2014)

The core version of the report printed a 0.2% uptick, close to the estimated 0.3% increase, but the previous month’s readings were revised lower. The flash services PMI printed stronger than expected results, with an upward revision in the previous reading. What weighed on the Greenback was the Fed bank stress test results, which showed that Citigroup and four other U.S. banks failed. Another factor that weighed on the dollar was the bond auction that showed a rapidly flattening yield curve. US initial jobless claims and pending home sales are up for release today, both of which are not expected to have a strong impact on the dollar unless they come in significantly above or below expectations.

EUR

The euro didn’t get to take advantage of dollar weakness in recent trading, as the region showed signs of economic weakness as well. Talks of negative deposit rates are starting to weigh on the shared currency again, as policymakers try to figure out what other tools they can use to battle deflation and prevent the euro from climbing higher. German GfK consumer climate came in line with expectations at 8.5. Euro zone money supply and private loans data are due today but these aren’t expected to make a huge effect on euro action.

GBP

The pound made a strong bounce in recent trading, despite the lack of data from the UK. Traders are pricing in strong UK retail sales in light of the rebound in hiring. After showing a 1.5% decline in the previous month, a 0.5% increase is expected for February.

CHF

The franc tried to take advantage of dollar weakness but its gains were limited, thanks to the SNB’s recent pledge to keep the franc weak. The UBS consumption indicator climbed to 1.57 from an upwardly revised 1.49 reading, lending a bit more support for the franc. There are no reports due from Switzerland today.

JPY

The yen gained ground to most of its major counterparts, as traders flocked to the safe-haven currency against the US dollar. The Nikkei has been on a decline, which also means that risk sentiment is in support of the yen. Traders are starting to price in the impact of the corporate tax hike due next month. Japanese household spending and inflation data are up for release in the next Asian session.

Commodity Currencies (AUD, NZD, CAD)

The comdolls cashed in gains in the midst of dollar weakness, with AUD/USD climbing to the .9200 major psychological level and NZD/USD breaking above consolidation. Perhaps the most surprising move among the comdolls was USD/CAD’s dip below the 1.1100 major psychological level despite recent BOC remarks on a possible rate cut. New Zealand printed a stronger than expected trade surplus of 818 million NZD although the previous month’s surplus was revised lower.

By Kate Curtis from Trader's Way