London Session/New York Open: USD Consolidates Amid Global Growth Concerns

The US dollar is consolidating against most majors and trading higher against the commodity currencies after Chinese Premier Wen cut China’s 2012 GDP growth outlook to 7.5%. Over the weekend, China’s official non-manufacturing PMI fell below the 50 level in Feb. to 48.4 from the prior 52.9 indicating a shift to contraction in the service sector. The news out of the world’s second largest economy spurred risk aversion which saw equities lower and the USD higher. Asian markets finished to the downside and European bourses are currently trading in the red. U.S. equity futures are currently pointing to a negative open with S&P 500 futures currently down -0.24%.

The euro is slightly lower as the Greek PSI gets underway and ahead of the ECB meeting later this week. The PSI is to be completed by Thursday and markets await details of the extent of participation to determine if 1) Greece will invoke collective action clauses (CACs) likely triggering a CDS credit event and 2) if the swap will have sufficient participation for Greece to meet the terms of the second bailout. Economic data released earlier showed that the Euro zone services PMI dropped to 48.8 in February from the prior 49.4 while the composite PMI declined to 49.3 from the prior 49.7 which also put added pressure on the common currency. EUR/USD has rebounded back above the 1.32 figure after finding support around the 38.2% Fibonacci retracement of the rally from January lows to February highs which comes in just below the 1.3160 level. The pair may face resistance around the 1.3230 Kijun line ahead of the 1.3250 21-day SMA.

The Japanese yen is outperforming against the buck on haven flows and a technical correction from an overextended rally. The yen is stronger against all of the G10 currencies – most notably against the NZD (NZD/JPY is lower by -1.13% on the day so far). USD/JPY stalled ahead of the 82.00 figure and 100-week SMA as it made session highs of nearly 81.87 before retracing to around 81.35 at time of writing. Exporter selling also helped to push the pair lower.

Data due out of the NY session today includes the February ISM services index which is expected to fall slightly to 56.2 from the prior 56.8 while January U.S. factory orders after anticipated to decline -1.5% from the prior +1.1%. Both reports are scheduled for release at 1000ET.