Durable Goods and Firewalls, Japan Retail Sales Upcoming

Worries about the strength of the US recovery and Spanish finances weighed on the euro and risk currencies in US trading. On the day, the yen was the best performer while the Australian dollar lagged. Japanese retail sales are the top release in Asia.

US durable goods orders grew 2.2% in February, slower than the +3.0% consensus estimate. January orders were also revised down slightly and core orders fell short of expectations. The most-recent US data has been consistently on the soft side and talk about warm-weather effects related to upside surprises early in the winter is growing.

Mixed reports on the EU firewall thats expected to be unveiled on Friday have the market confused. An EU draft report said the fund will be increased to 940 billion euros until mid-2013 but a separate report said the effective lending capacity will be only 700 billion euros.

Concerns are growing that Spain will need to tap bailout fund after the finance minister said first quarter GDP will be close to the 0.3% contraction in Q42011. Widely circulated research reports are also suggesting that Spain will need help to meet its obligations.

EUR/USD fell to 1.3276 from 1.333 in the first half of US trading but clawed most of the losses back as stocks regained some ground. The S&P 500 closed down 0.5% to 1405.

The Australian dollar was weak as talk circulated about a rate cut next week. We highly doubt that will be the case with all 26 economists surveyed by Bloomberg forecasting no change.

Asia-Pacific Preview

There is also talk that Japan will take further easing measures but that may depend on the economy. A clue will come at 2350 GMT (00:50 London Time) when February retail sales are released. The Consensus is for a flat reading after a 4.1% rise in January.

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