Dollar Softer As Consolidation Continues

The dollar is a bit softer this week as it consolidates broadly. Chicago Fed Evans said the Fed's policies are "working" and that the U.S. economy "seems to be performing quite well". He's optimistic that unemployment will continue to go down. He expects "self-sustaining growth" at "escape velocity" next year. Regarding the asset purchase program, he said that the asset values so far "looks relatively reasonable". And, he would like to see " … a few more months of data" before adjusting the pace of the program. This would probably be at least 200k job growth per month through the summer. More Fed officials will speak today, including St. Louis Fed Bullard and New York Fed Dudley. The main focus though, will be Chairman Bernanke's testimony on Wednesday on the economy before the Joint Economic Committee. The timing of Fed's tapering of the quantitative easing program will remain a market focus.

RBA minutes showed that the central bank said that "conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high despite lower export prices and interest rates." Overall, the board judged that "taking all the factors into consideration, the board decided that some of the scope to ease policy should be used at this meeting." And, "a further reduction in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.'' The Aussie was steady after the release.

The yen was slightly weaker but remains range bound. The BoJ kicks off a two day meeting today, and it's widely expected that the central bank will adhere to policies. There are talks that it could front-load the bond purchases, or offers funds through market operations to stop the slide in JGBs. Finance Minister Aso urged the central bank to communicate with bond markets "in a thorough way" regarding recent volatility. BoJ governor Kuroda said that if economic outlook improves, it's "natural" to raise interest rates "gradually". However, he didn't see a surge in long term interest rates as the BoJ has been "pressing them hard through a massive bond-buying program".

On the data front, the Australia conference board leading indicator rose 0.1% in March. Inflation data will be a main focus today. The U.K. is slated to release both PPI and CPI. The CPI in particular is expected to drop to 2.6% yoy in April. The German PPI will also be featured.