The weak U.S. ISM manufacturing PMI figure for March triggered a round of dollar selling during yesterday's New York session as the actual reading slipped from 54.2 to 51.3. This reflects how the expansion in the manufacturing industry slowed down during the month, making traders worry that the U.S. will be unable to sustain its recovery. For today, there are no major U.S. reports on tap so we might see quiet trading conditions during the New York hours.
The euro was able to recover against the U.S. dollar during yesterday's trading hours despite the lack of liquidity during the London session. Only medium-tier reports are due from the euro zone today but these reports could still usher in some volatility for euro pairs. Germany will be releasing its CPI while Spain will print its employment data and manufacturing PMI. Italy is also set to report is manufacturing PMI during the euro session. Bear in mind that weaker than expected readings could weigh on the euro while stronger than expected reports could give the shared currency a boost. Euro zone employment data is also set for release later on during the day.
The pound was able to take advantage of dollar weakness during yesterday's market hours yet the currency might be forced to return its recent gains today if the U.K. manufacturing PMI falls below expectations. The reading for March is projected to improve from 47.9 to 48.9, reflecting slower contraction in the industry. If it fails to impress, it could have a negative impact on the upcoming BOE rate decision, which might lead traders to start selling the pound early. After all, policymakers did remark that they will be keeping close tabs on business surveys to figure out if more easing is necessary or not.
Switzerland will be reporting its SVME PMI figure for March during today's London session. The reading is expected to dip from 50.8 to 50.5 for the month, showing that the expansion in the manufacturing industry was slower during the period. Stronger than expected data could push USD/CHF lower while weaker than expected results could give the pair a boost.
There are no major releases from Japan for now as traders await the BOJ interest rate decision on Thursday. Yen pairs are trading on country-specific events, with USD/JPY selling off after the U.S. printed a weak ISM manufacturing PMI figure.
Commodity Currencies (AUD, CAD, NZD)
The RBA decided to keep rates on hold at 3.00% as expected, barely triggering any reaction on Aussie pairs. Governor Glenn Stevens noted that while global growth has slowed below average pace, downside risks to the Australian economy have been reduced. He remained optimistic as he pointed out that there are still plenty of opportunities for growth. As for Canada and New Zealand, there are no reports on their schedules, which might mean we'll see mostly sideways trading for USD/CAD and NZD/USD.