Euro posts gains against US dollar

During early Asian trading this morning the euro climbed to a 2-day high against the US dollar, due to an increase in investors’ risk appetite after surprise German and US data released yesterday. German economic sentiment improved in March, defying economists' expectations. The Mannheim-based Centre for European Economic Research, or ZEW, said its economic sentiment indicator for Germany rose 2.3 points to minus 3.5 in March, the highest since July 2007. It also marked the fifth consecutive month of increase. Economists had forecast a decline to minus 8 from minus 5.8 recorded in the previous month. However, the indicator is still below its historical average of 26.2.

Consumer confidence in the United States improved last week, but remained in negative territory overall, according to survey results released yesterday by ABC News and the Washington Post.

In the UK Bank of England minutes, ILO Unemployment Rate and Jobless Claims change data will be released at 09.30 GMT. In the US, Consumer Price Index will be announced at 12.30 GMT. The Fed Interest Rate decision will take place at 18.15 GMT today.

Pound/Aussie pushes lower

The Australian dollar was slightly firmer against sterling yesterday, after a further rally in global equities eased investor risk aversion even more. Despite some upbeat data from Germany and the US, sentiment on the UK economy remains largely negative. This was reinforced by housing data which showed that prices fell 11.5 percent on the year in January. Investors continue to remain cautious as upcoming events later today could easily send markets back into an extreme risk aversion mode. Domestically, the BoE minutes from the last meeting are released, as well as unemployment figures. Investors will then turn their attention to the US Federal Reserve decision on interest rates. As interest rates are effectively at zero markets will concentrate on whether the Fed will follow the BoE's lead and utilise unconventional methods to stimulate the economy.

Pound continues to weaken against Kiwi dollar

The New Zealand dollar remained largely range bound yesterday as it continued to be supported by the recent improvement in equity markets. With little major domestic data due for the rest of the week the kiwi will be directed by broader market movements, in particular the Federal Reserve’s policy meeting which ends later today.