Dollar Mostly Firmer, but Euro even Firmer

The greenback is licking its recently inflecting wounds and has begun the week on somewhat firmer footing against most of the majors, except the euro and Swedish krona.  London markets are closed and so turnover appears soemwhat lighter than usual.  The general tone is consolidative in nature.  Outside of the death of Bin Laden, there were three developments to note.

First, Chinca's PMI came in softer at 52.9 down from 53.4 from March.  The consensus had expected an increase to 54.0 but that was before the HSBC measure was released at the end of last week and was flat at at 7-month lows.  Of note, the forward looking new oprders sub-index in the official measure was at 8 month lows (53.8 from 55.2) and the inpout price sub-index was at 7 month lows (66.2 vs 68.3).  

Second, EMU manufacturing PMI increased to 58.0 from the 57.7 flash reading.  The story continues to be the core strength offsetting the weakness ni the periphery.  German and French readings came in above the flash indications  while Itlany and Spanish data were softer.  

Third, this coupled with the high CPI fighres from last week warns that ECB rhetoric will remain hawkish.  The ECB most likely will not hike rates this week, but the market will be on alert for word signals that suggest a hike in June rather than July, which seems the consensus expectation.  Today is the first day Weidman takes over at the helm of the Bundesbank and his words and tone are very Weberian. 

Short-term technical readings warn of the risk of a stronger US dollar in North America today, but selling into dollar bounces still looks to continue to be the main strategy at the start of the new month. 

Canada goes to the polls today.   Most likely outcome seems to be the status quo.  Minority conservative government.  Canadian dollar shrugged off  the softer than expected Feb GDPO report before the weekend--with the US dollar falling from  CAD0.9550 to CAD0.9440 roughly.  CAD, like the dollar block are weaker today, but the US dollar appears to now be encountering resistance near CAD0.9500.  CAD underperformed recently, as is common in weak US dollar environment.  Underlying fundamentals remain constructive.