The Australian and New Zealand dollars are facing heavy selling pressure after the Reserve Bank of Australia held interest rates unchanged at 4.25 per cent, but left the door to additional monetary easing wide open. Commodity-linked currencies were already under pressure following China’s downbeat growth projections that raised concerns over world growth and Chinese demand for natural resources. The pound steadied but found levels difficult to maintain against its key rivals after UK service sector data missed forecasts. The US dollar on the other hand looks set to advance broadly this week following exceptional service sector figures that offered fresh evidence of US economic growth gathering momentum. The safer Japanese yen also traded positively, tracking global sentiment which is turning noticeably risk averse following China’s announcement and upcoming event risks. Looking ahead, the euro appears likely to take centre stage this week as the European Central Bank meeting could see President Mario Draghi signal his intent to loosen monetary policy even more after dreadful eurozone service sector data heightened concerns of a deeper than expected recession.
Sterling
Although the pound’s progress in March is notably better than its performance last month, the British currency is finding its upside limited following below-forecast services data and weak retail sales data release from the British Retail Consortium.
US dollar
The US dollar opens relatively unchanged but still within striking distance of two-week highs versus the euro as investors remain focused on non-farm payrolls data and eurozone headlines. However, local services sector data highlighted US economic growth is broadening while the Federal Reserve’s Richard Fischer said he saw little scope for more monetary easing.
Euro
The euro stumbled to March lows versus the US dollar after data showing a faster than expected decline in the eurozone’s services sector in February. The shared currency then later recovered somewhat, supported by better-than-expected retail sales data and an improved investor sentiment index report. Keeping one eye on the revised fourth quarter growth data, and the European Central Bank meeting, investors are also paying close attention to ongoing developments in Greece. Athens will attempt to complete its controversial bond swap this week which will involve private investors exchanging their existing bonds for replacement government-backed securities that are worth almost 54 per cent less in value. If investors still reject the terms laid out as part of the controversial deal and are forced to accept losses, a major credit event could be triggered sending jitters through global financial markets.
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