NEWS / Foreign Exchange

The Bank of England decided this morning to keep its main policy rate unchanged at 5.25%

Yesterday's U.S. economic data were a tad bit disappointing. Factory orders rose 1.0% in February, which was not as strong as the consensus forecast had anticipated and not nearly enough to reverse the 5.7% drop registered during the previous month. The ISM non-manufacturing index slipped from 54.3 in February to 52.4 in March, the lowest reading since April 2003. In general, the data portray an economy that continues to grow, but at a rather sluggish pace. However, dollar exchange rates showed little reaction to the weaker-than-expected data. Perhaps market participants are waiting until the labor market report for March, which will print tomorrow morning, or even until after the Easter holiday to make their next move.

The Bank of England decided this morning to keep its main policy rate unchanged at 5.25%. Because some investors had expected the MPC to raise rates by 25 basis points this morning, the decision has weighed somewhat on sterling. In Canada, employment rose by 54,900 in March, which was much stronger than the 11,000 rise that the market consensus forecast had anticipated. The Canadian dollar has strengthened in the wake of the data release.

The only remaining item of note on the docket this morning is the weekly series of initial jobless claims, which will print at 8:30 EDT. Speaking of the U.S. labor market, data on non-farm employment in March will be released tomorrow morning. On one hand, the data have the ability to significantly affect dollar exchange rates if they are markedly different from the  consensus forecast, which anticipates a 130,000 rise in payrolls. On the other hand, most European financial markets will be closed tomorrow in observance of Good Friday. Therefore, trading could be very quiet if the outcome is anywhere close to expectations.