The US dollar continues to consolidate in uninspiring activity. There is little technical indication that the downside correction is over. At the same time, US interest rates remain softer, and today’s durable goods orders report is not expected to give the dollar bulls much help. Large option expiries today and tomorrow may also serve to contain the price action. Between today and tomorrow nearly 3.4 bln euros of $1.09 strikes and $2 bln of JPY120 strikes expire.
The US dollar is mixed, but largely confined to its recent ranges. The euro and sterling are firmer, the yen unchanged, and the dollar bloc softer. Among the emerging market currencies, the Russian ruble is the strongest, gaining more than 1.5% against the dollar. The Hungarian forint is also stronger after yesterday’s 15 bp rate cut. Asian equities were firm, though MSCI Emerging Market equity index is off by more than 1%. European shares are lower, with the Dow Jones Stoxx 600 is off by about 0.25% near midday in London. Information technology and energy are the weakest sectors. Core bond yields are mostly softer, while peripheral European bond yields are 1-2 bp higher. In the first two weeks of its sovereign bond purchase program, the ECB has been buying almost 3 bln euros a day.
The news stream is light, which is also conducive for the consolidative tone. There were three highlights from the European morning. First, French business confidence ticked up in March to reach a three-year high. This may reflect the pro-business shift by the Hollande government and the reforms pushed through last month.   Â
Second, German’s IFO confirms other survey data indicating that Europe’s largest economy is on firm footing in Q1. The measures of the business climate rose to 107.9 from 106.8 to stand at its best level since last July. The current assessment rose to 112.0 from 111.3. The expectations component rose to 103.9 from 102.5 and was the highest since last June.Â
