Euro Consolidates, Cyprus Parliamentary Debate On Bank Levy

The euro continued to consolidate above yesterday's low, as markets were calmed by the limited impact on peripheral yields by the news from Cyprus. Investors are so far relatively confident that the bank deposit tax in Cyprus is a one-off rather than the start of a wider move in Eurozone. While maintaining that EUR 5.8b revenue target, eurozone ministers urged Cyprus to consider restructuring the levy plan and refrain from charging smaller depositors. The original plan was that 6.75% tax would be charged to deposits up to EUR 100k, and EUR 9.9% above that. The new plan could be a 15.6% levy on deposits of more than 100k and no levy below. The parliamentary debate on the issue was delayed to today.

The yen retreated from yesterday's rebound as risk markets recovered. Outgoing BoJ head Shirakawa is ending his five year term a few days earlier, and will give his final press conference today. New BoJ head Kuroda, and deputies Iwata and Nakaso will take office tomorrow. It's reported that a veteran of quantitative easing, Amamiya, was brought back as Kuroda's top policy planner. It's reported that Amamiya is excellent at finding the middle ground, and would help Kuroda pursue aggressive easing while keeping BoJ from crossing the line.

In Australia, RBA deputy governor Lowe said that the strong currency and high saving rates helped "digest a huge investment boom without generating substantial imbalances in the economy." RBA said in its minutes that "Interest rate sensitive parts of the economy continued to show signs of responding to these low rates and it was likely that this still had further to run." RBA said rate is "appropriate" even though further reductions "may be required" and pledged "to assess further developments over the period ahead."

On the data front, U.K. inflation data will be a major focus in the European session. CPI is expected to rise slightly to 2.8% yoy in February. PPIs, though, are expected to be moderate. German ZEW is expected to drop slightly to 47.5 in March, while the Eurozone ZEW is expected to rise slightly to 43.7. New residential construction data is expected from the U.S.