Dollar Weighed Down By Data, Aussie Stronger After RBA

The dollar is still feeling the weight from yesterday's ISM manufacturing index, and remains broadly soft. There is some more profit taking driving the USD/JPY down ahead of the BoJ meeting. The euro recovered against the dollar overnight, but strength is limited so far with EUR/USD staying below 1.29. Investors are still concerned with political uncertainties in Italy, and are cautious ahead of ECB meeting later this week. The aussie rebounds today as RB left cash rate unchanged at 3% in April, as widely expected.

As expected, the RBA left the cash rate unchanged at 3% in April. Policymakers stated that the current economic conditions justified leaving interest rates at a record low. The inflation outlook, however, suggested that further easing is possible. Domestic economic growth was close to trend last year. The RBA stated yet again that mining investment is peaking, and other demand sources are needed to sustain growth. The government has not commented on the job market, probably due to the lack of material change from the previous meeting. Overall, the tone for this meeting remained dovish and further easing is still likely.

In Europe, Italy's President Giorgio Napolitano will meet advisers today for talks on forming a new government. The discussion will be focusing on economic and institutional reform measures. Napolitano is buying time for Bersani, Berlusconi and Grillo to form a broad coalition. Napolitano refrained from giving Bersani the mandate as prime minister until he can secure enough parliamentary support.

The BoJ will have the first meeting on Thursday with Haruhiko Kuroda. The market is expecting further policy easing, as Kuroda recently told the parliament that he would consider buying longer-dated JGBs, boosting purchases of riskier assets, eliminating the so-called "bank note rule" and simplifying the structure of asset purchase programs.

On the data front, Japan monetary bas rose 19.8% yoy in March, while labor cash earnings dropped -0.7% yoy in February. Swiss SVME PMI dropped sharply to 48.3 in March. U.K. PMI manufacturing will be the main focus in European session. The UK is due to release mortgage approvals and M4. The eurozone will release PMI manufacturing revision, unemployment and German PMI. The U.S. will release factory orders later today.