USD lower as economic indicators disappoint

•       USD lower as economic indicators disappoint

–      Weak Chicago Fed PMI, rise in “jobs hard to get” index disappoint; yields down 2 bps

–      Nonetheless Fed funds expectations rise on hawkish comments by Lacker, George

–      USD weaker vs most G10, EM currencies – change in economic expectations or just no more end-quarter buying to do? We’ll see today.

•       China official manufacturing PMI back above 50 (barely)

–      Index rises to 50.1 from 49.9 (expected to fall); AUD gains marginally, but loses most of the gains as iron ore prices continue to fall

–      More important:  China insures bank deposits, a step towards liberalizing interest rates. That’s good long term but in short term means more bankruptcies = AUD-negative

•       Q1 Tankan is very disappointing

–      No improvement for large manufacturers, decline expected in Q2; capital spending plans revised down = no signs of recovery even a year after hike in consumption tax

–      Stocks & USD/JPY fall, but it’s JPY-neg long term as Abe will want to boost exports

•       Today:

–      Eurozone: manufacturing PMI from several European countries

–      UK:  Manufacturing PMI

–      US: ADP report expected to show increase from last month = USD-positive

–      Speakers:  Fed’s Lockhart & Williams