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The euro steadied versus the dollar on Tuesday even after Germany indicated that aid to Greece will not be discussed at this week's European Union meeting in Brussels.

With Greece in limbo despite measures designed to get its spiraling debt under control, the euro has struggled to fight back from February's notable losses against the dollar.

The euro was under pressure in early dealing, but pared its losses after another round of lackluster data on the US housing market.

Existing home sales saw a modest decrease in the month of February, according to a report released by the National Association of Realtors on Tuesday, with modest gains in the Northeast and Midwest offset by softer sales in the South and West.

The report showed that existing home sales edged down by 0.6 percent to a seasonally adjusted annual rate of 5.02 million units in February from a 5.05 million unit rate in January

Across the Atlantic, European consumer confidence was more or less unchanged in March, a flash estimate from the European Commission showed.

"March's eurozone consumer confidence figures confirm that consumer sentiment remains weak by historical standards and that a household spending recovery some way off," said Ben May, European economist at Capital Economics. "With wage growth slowing and tighter fiscal policy on the way, prospects do not look much better for the remainder of the year," he added.

The euro slipped to 1.3480 versus the dollar in early dealing, coming close to a 9-month low of 1.3434 set earlier in March.

Versus the yen, the euro was steady after losing ground in the previous few sessions. The euro was stuck near 122, having touched a yearly low near 120 back in February.

Meanwhile, the euro leveled off near .90 versus the sterling, having seen choppy movement over the past few days.


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The British economy emerged from recession in the fourth quarter more strongly than initially estimated. The outlook for the economy is fundamentally weak and the prospect of a sluggish and fragile recovery remains.

The economy expanded 0.4% sequentially in the fourth quarter, better than the previous estimate of 0.3%, according to the latest report from the Office for National Statistics. On February 26, the statistical office had first revised fourth quarter growth to 0.3% from 0.1%. Economists had expected the ONS to confirm the 0.3% growth figure today.

The fourth quarter growth follows six quarters of contraction, which made it the longest recession since records began in 1955. Gross domestic product dropped 0.3% in the third quarter and 0.7% in the second quarter.

There are good reasons not to get too excited, said Jonathan Loynes, Capital Economics' chief European economist. The economy is operating a long way below its potential or trend level.

David Kern, chief economist at the British Chambers of Commerce, also shared the same view. He said, "It is clear that the UK recovery is still frail, vulnerable, and businesses are facing serious pressures." A double-dip recession is still a potential threat that must be avoided at all costs. Given the dangers still facing the economy, policy must remain expansionary, he added.

The household saving ratio was 7% in the latest quarter, compared with 8.4% in the previous quarter. Real household disposable income fell 1%, following a 0.6% increase in third quarter.

Further falls in the savings ratio will be needed if spending is not to decline, ING Bank NV's Mark Cliffe said. The decline in the saving ratio reflected higher borrowing as the housing market staged a modest rebound. However, households may have to scale back their purchases of assets as banks are likely to be less willing to lend and consumers less willing to borrow than in previous cycles.

On the production side, construction output was down 0.9% sequentially, compared with the 1.8% increase in the previous quarter. Output of production industries was unrevised at 0.4% after recording a 1% fall in the third quarter with manufacturing output growing 0.8%. Output in the service industries also remained unrevised at 0.5%. Agricultural output dipped 1.5%.

On an annual basis, economic contraction for the fourth quarter was lowered to 3.1% from 3.3%. GDP in volume terms fell 4.9% for 2009 as a whole, the largest fall on record, compared with a rise of 0.5% in 2008. Overall output declined by 6.2% during this recession.

ONS data showed a 0.4% sequential rise in household expenditure. Spending remained 2.1% lower than the fourth quarter of 2008. Government spending moved up 1% taking the annual growth to 2.2%. Meanwhile, gross fixed capital formation recorded a 2.7% quarterly fall and plunged 14% annually. Inventories continued to decline, down 2.6 billion pounds on the quarter.

According to Capital Economics' Loynes, the further upward revision to growth came primarily from an even bigger positive contribution from inventories. It is very unlikely that this component will have such a positive effect in the quarters ahead, the economist said.

Again, with income set to be squeezed further by high inflation and rising taxes this year, spending will possibly remain under pressure. Capital Economics forecast the U.K. economy to grow by just around 1% in 2010.

Last week, the Chancellor of the Exchequer Alistair Darling in his 2010 budget statement said the economy is expected to grow 3% to 3.5% in 2011, in line with the Bank of England estimate. The government maintained its growth estimate at 1%-1.5% for 2010.

ONS data also showed that the trade deficit in real terms increased to 8.3 billion pounds in the fourth quarter of 2009. Exports of goods and services rose 3.8% whilst imports were up 4.7%. The improvement in global demand conditions as well as a fall in pound had only a limited impact on the external sector, noted Loynes.

In a separate communique, the ONS revealed the current account balance recorded a deficit of 1.7 billion pounds in the fourth quarter. This compares with a revised deficit of 5.9 billion pounds in the third quarter. Economists had forecast a 5.1 billion pounds deficit for the final quarter. In 2009, the current account was in deficit by 18.4 billion pounds, compared with a deficit of 22 billion pounds in 2008.


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The dollar was slightly weaker versus other majors Tuesday morning after ratings agency Fitch said Europe's aid deal for Greece was a net positive for the debt-ridden nation.

The Dow continued its push toward 11,000 on Monday, but stocks appear poised for a lackluster start to today's session.

Traders were looking ahead to the day's economic news from the US.

The S&P/Case-Shiller home price index for January will be released by 9.00 a.m. ET. Economists expect the index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., to decline 0.6% year-over-year, following the 3.1 % decline in the previous month.

At 10.00 a.m. ET, the Conference Board will release the readings of the Consumer Confidence Index for March. Economists expected the index to increase to 51.0 from 46.0 reported for the previous month.

Yesterday, official data showed that consumer spending rose in February, signaling that shoppers are becoming less shy about making purchases.

The dollar eased to 1.3520 versus the euro, more than two cents from a 10-month peak of 1.3267 set last week.

Despite saying last week's deal between the European Union and IMF to backstop Greek debt was positive, Fitch will keep its negative outlook on Greece's BBB+ debt rating.

"The (EU) statement was positive for Greece's credit profile by enhancing its near-term financing options and flexibility as well as reaffirming the support of euro area member states for economic and fiscal reform in Greece," Fitch said in a statement.

"Nonetheless, the rating outlook remains negative because of continued uncertainty over the medium-term economic and fiscal adjustment, as well as the continuing lack of clarity over the fiscal financing strategy."

Germany's import prices rose at a faster annual pace in February led by higher energy prices, the Federal Statistical Office said Tuesday.

Import prices rose 2.6% year-on-year in February, faster than the 1.4% rise in January. Prices increased for a second straight month after a 1% decline in December. Economists were looking for an increase of 2% for February.

The buck also drifted lower versus the sterling, hitting 1.5070 after testing a 9-month high of 1.4782 last week.

U.K. house prices rose sharply in March, reversing February's surprise dip, a report from Nationwide Building Society showed on Tuesday.

At the same time, the dollar remained stuck in neutral versus the yen, hovering near last week's 2-month high of 92.94.

An index measuring industrial production in Japan was down a seasonally adjusted 0.9 percent in February compared to the previous month, the Ministry of Economy, Trade and Industry said on Tuesday.

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First-time claims for unemployment benefits showed another modest decrease in the week ended March 27th, according to a report released by the Labor Department on Thursday, with jobless claims falling to their lowest level since early February.

The report showed that initial jobless claims fell to 439,000 from the previous week's revised figure of 445,000. Economists had been expecting claims to edge down to 440,000 from the 442,000 originally reported for the previous week.

With the modest decrease, jobless claims extended a recent downward trend after seeing a brief rebound in mid-February. The drop pulled jobless claims down to their lowest level since a matching number in the week ended February 6th.

The Labor Department also said that the less volatile four-week moving average edged down to 447,250 from the previous week's revised average of 454,000. With the drop, the four-week moving average fell to its lowest level since September of 2008.

Additionally, the report showed that continuing claims, a reading on the number of people receiving ongoing unemployment help, fell to 4.662 million in the week ended March 20th from the preceding week's revised level of 4.668 million.

The decrease dragged continuing claims down to their lowest level since coming in at 4.589 million in December of 2008.

At the same time, the report also showed that those receiving emergency unemployment compensation increased by about 267 thousand in the week ended March 13th, although those receiving extended benefits edged down by about 3 thousand for the week.

Peter Boockvar, equity strategist for Miller Tabak, said, "The best conclusion from the data remains the same and that is businesses have dramatically tempered the rate of firing but still seem reluctant to aggressively add to their payrolls."

Employment data is likely to remain in focus on Friday, with the Labor Department due to release its monthly employment report, despite the Good Friday holiday. Economists expect the report to show that employment increased by about 190,000 jobs in March.

Payroll processor Automatic Data Processing, Inc. (ADP) released a report on Wednesday showing an unexpected drop in private sector employment in the month of March, although the drop still marked the smallest since employment began falling in February of 2008.

The report showed that non-farm private employment fell by 23,000 jobs in March following a revised decrease of 24,000 jobs in February. The loss of jobs surprised economists, who had expected an increase of about 40,000 jobs compared to loss of 20,000 jobs originally reported for the previous month.

However, ADP noted that its data for February was not restrained by the effects of inclement weather, and subsequently the data for March did not include a weather-related rebound. The company also noted that its March data does not include any federal hiring for the 2010 Census.


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The Greek government wants to amend the EU aid deal to avert severe fiscal measures the International Monetary Fund may recommend, the Market News International reported.

At the end of March, Eurozone leaders had reached an agreement to help Greece, with the participation of the IMF if the country fails to meet its funding needs.

Greek Prime Minister George Papandreou reportedly wants to alter the plan to bypass an IMF contribution. He fears that the measures the IMF would probably advocate, may cause social and political unrest.

Elsewhere on Tuesday, the Financial Times reported that Germany is at odds with other Eurozone countries over the rate of interest to be charged on the aid to the debt-ridden Greece if Athens calls on the emergency loans package.

According to the report, most Eurozone nations are prepared to offer loans at 4%-4.5%, but Germany says Athens should pay 6%-6.5%.


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U.K.'s top earners will be forced pay more tax as the rise in the tax rate to 50% from 45% takes effect from today. The new rate will affect 300,000 people in the country, who earn above GBP 150,000 per annum. The increase in the tax rate was intended to boost the country's public finances.

Most business groups responded against the move. The Institute of Directors said the proposal is superficially attractive, but it is foolish when dug deeper. The think tank argued that this policy will not help people by bringing in more tax revenue from high-income people. Nor can it be justified by reference to considerations of fairness.

"Increasing the top rate of income tax to 50% will raise little or no money, but it will send out a very bad message - both domestically and overseas," the IoD said.

Listing out the reasons why the policy should be abandoned, the IoD said one cannot compute the effect of a tax rise simply by applying the increase in the rate to the income that is currently subject to U.K. taxation. Moreover, it is very difficult to predict the effects of rate changes, mainly because of uncertainty about the effects on incomes, and also partly because of uncertainty about the future distribution of incomes.

Subject to these uncertainties, the IoD concluded that the revenue-maximising rate on incomes over GBP 150,000 might well be the current 40% rate, rather than the proposed 50%.

With the new tax rate in force, it is feared that companies may shift their operations to more business-friendly nations, which may hurt the U.K.'s government revenue.

Other changes coming into force today include a rise in child tax credits and an increase in the tax-free allowance that can be put in to individual savings accounts.

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The franc showed mixed trading versus other major currencies during early North American session on Monday. The franc rose to a multi-day high against the pound, eased from a 6-day high against the yen and a 10-day high against the dollar and recovered from near a 4-week low versus the euro.

Against the Japanese currency, the Swiss franc eased slightly from a 6-day high of 88.37 hit at 7:05 am ET. Currently, the franc-yen pair is worth 88.25, compared to 87.42 hit at last week's close.

The franc rose to a 5-day high of 1.6281 versus the pound at 8:45 am ET, compared to 1.6396 hit at last week's close. As of now, the franc is quoted at 1.6301 against the pound.

The franc that rose to a 10-day high of 1.0553 against the dollar around 1:00 am ET eased thereafter. The franc is now trading at 1.0590 against the dollar. This level may be compared last week's close of 1.0661.

The franc, which slipped to near a 4-week low of 1.4468 against the 16-nation currency at 2:25 am ET reversed its direction shortly thereafter. Currently, the franc is trading at 1.439 versus the euro, compared to previous week's close of 1.4388.

In the upcoming hours, the U.S. monthly budget statement for March has been slated for release.


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The International Monetary Fund took a major step on Monday towards a more than ten-fold increase in the size of its primary credit facility to $550 billion and also reformed the fund's standing credit arrangement into a more flexible and effective tool of crisis management.

It responds to the call by the leaders of the G20 nations to increase the financing available to the fund, by expanding the IMF's New Arrangements to Borrow or NAB, which currently stands at about $50 billion.

The NAB is supplementary to the IMF's quota-based resources and is only called upon to forestall or cope with an impairment of the international monetary system.

Thirteen new countries, including the likes of China, India, Russia and Brazil, will now contribute to the lender's NAB, in addition to the 26 predominantly developed nations.

"The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the fund's efforts in crisis prevention and resolution, as an essential back-stop to the fund's quota resources," said IMF managing director Dominique Strauss-Kahn.

"This will help ensure that the fund has access to adequate resources to help members that are vulnerable to financial crises."

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Thursday morning, the Federal Reserve Bank of Philadelphia released its report on regional manufacturing activity in the month of April, showing that the expansion in the manufacturing sector is continuing for the eighth consecutive month.

The Philly Fed said its index of activity in the manufacturing sector rose to 20.2 in April from 18.9 in March, with a positive reading indicating growth in the sector. With the increase, the index came in slightly above economist estimates for a reading of 20.0.

A faster pace of new orders growth contributed to the improvement in the sector, as the new orders index rose to 13.9 in April from 9.3 in March.

On the other hand, the shipments index slipped to 5.6 in April from 13.6 in the previous month, although it remained positive.

The report also showed a notable increase by the inventories increase, which rose to a positive 2.0 in April from a negative 11.0 in March, indicating a turnaround in inventories. The inventories index has now recorded positive readings in two of the last three months.

The Philly Fed also said that firms' responses continue to suggest that labor market conditions are improving, although the number of employees index slipped to 7.3 in April from 8.3 in March.

With regard to inflation, the report showed that the prices paid index rose to 42.7 in April from 38.6 in March, while the prices received index edged up to a positive 1.0 in April from a negative 0.4 in the previous month.

Looking ahead, the future general activity index fell to 44.2 in April from 52.0 in March, but it remained positive for the sixteenth consecutive month.

"Bottom line," said Peter Boockvar, equity strategist for Miller Tabak, "manufacturing remains the key source of strength in this recovery and today's data confirms that."

Earlier in the day, a report released by the New York Federal Reserve showed that conditions for New York State manufacturers improved at a rapid pace in April, with the regional index of activity in the sector rising by much more than economists had expected.

The New York Fed said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.


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Standard & Poor's lowered its 2010 growth forecast for Italy on Tuesday citing feeble demand, weak capital spending and export prospects.

The rating agency cut the growth forecast to 0.5% from a previous 0.7%, reports said. Looking ahead, S&P forecast the economy to grow 1% next year, which is half of what is seen for the Eurozone as a whole.

Feeble consumer demand on the back of falling earnings, anemic capital spending because of damaged corporate profitability and export prospects penalized by weak competitiveness are holding the economy in check, the rating agency was quoted as saying in a report that made no reference to ratings. S&P expects any return to growth in 2010 to be modest.

The Italian economy contracted 0.3% sequentially in the fourth quarter following the 0.5% growth in the third quarter, when the economy ended five quarters of negative GDP. The statistical office is due to release the preliminary estimate of first quarter GDP on May 12.

Interim forecast from the European Commission showed 0.4% growth for the Italian economy in the first three months of this year. The Paris-based Organisation for Economic Co-operation and Development said in an interim assessment recently that the economy likely grew 1.2% in the first three months of the year. The economy is forecast to expand 0.5% in the second quarter.


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