USD Gains amid Global Growth Concerns

USD is higher against most of the majors with the exception of the NOK as sentiment declines after contractionary PMI readings in China and Europe. China's unofficial flash manufacturing PMI improved to 49.7 from the prior 48.8 but signaled continued contraction in the manufacturing sector. Asian stock markets closed slightly higher and European bourses are currently in the red along with U.S. equity futures. The UST yield curve is flatter as 2-yr yields are slightly higher while 10-yr Treasury yields are lower by about 1.4bps to 2.045%. The Dollar Index is trading back inside of its daily cloud and has found resistance so far today around the Tenkan line which is currently around the 79.35 level. January existing home sales are due out at 1000ET and are expected to rise 1.1% from the prior month to 4.66M.

EUR continues to consolidate against most of the majors but is stronger against the high beta currencies (which are sensitive to global growth) and the GBP. The February Euro zone manufacturing PMI came in lower than expected at 49.0 and the EZ services and composite PMI's unexpectedly fell below the key 50 threshold with prints of 49.7 and 49.4 respectively (a reading below 50 indicates contraction). Sovereign yield spreads over Germany are higher across the board after the ratings agency Fitch downgraded Greece to ‘C' from ‘CCC' and said that a default is highly likely in the near term. Fitch said that a PSI offer would be a “distressed debt exchange” and lead to a “restricted default”. Greece's Finance Minister Venizelos spoke earlier and said that a Greek bond exchange is expected to occur March 12 and will be open for 10 days. The EUR is relatively unchanged against the buck and is strongest against the GBP and weakest against the NOK.

GBP underperforming after more dovish than expected MPC minutes from the BOE. The minutes showed a unanimous vote to keep rates at 0.5% and a 7-2 vote in favor of the £50B in additional QE with dissents calling for a £75bn expansion. This weighed on the pound as is currently trades weaker against all of the G10 currencies. GBP/USD fell to current levels of about 1.5660 and is below the 100-day SMA while EUR/GBP rallied to test the top of its daily ichimoku cloud around the 0.8445 area.

JPY continues is decline as markets take time to adjust to the change in the BOJ stance and explicit inflation target. USD/JPY broke above the 80 level for the first time since early August and now faces key resistance around 80.25 which were the highs after the August intervention. The yen is firmer against all of the majors except for the GBP which looks to have stalled just above the 126.50 level.

CAD is mostly weaker despite higher oil prices as the correlation between the Loonie and oil has broken down significantly. USD/CAD advanced within its recent range to trade back above parity after breaking above the convergence of the 21 and 55-day SMA's which are around 0.9980/85 and likely to be a pivotal level on a daily closing basis. There is no economic data of note due out of Canada today.