NEWS / Foreign Exchange

The dollar weakened against most major currencies

Data released yesterday morning showed that new home sales in the United States fell to a 7-year low in February. Coupled with the downward revision to the previous month's figure, the outturn was significantly weaker than expected. The stock market declined in the immediate aftermath of the news on the view that perhaps the housing market is entering another downleg, although share prices subsequently recovered. The dollar weakened against most major currencies, but, unlike the stock market, it did not really recover.

The euro got an additional boost this morning when the Ifo index of German business sentiment printed stronger than most market participants had expected. The consensus forecast had anticipated that the Ifo index would post its third consecutive decline in March. In the event, the index rose to 107.7 from 107.0 in February, which suggests that the effects of the increase in the German value-added tax that took effect on January 1 are starting to fade. The increase in the Ifo index reinforces the notion that the ECB's tightening cycle is not yet over.

The only item of note on today's docket is the Conference Board's index of U.S. consumer confidence, which will print at 10:00 EDT. The index will shed some light on how consumer sentiment is faring in the midst of volatility in financial markets and headlines detailing the troubles in the mortgage market. Not surprisingly, the consensus forecast looks for a decline in consumer confidence. However, weaker-than-expected numbers could weigh further on the greenback.