Sterling weakens broadly after disappointing data. Q1 GDP slowed to 0.3% qoq versus expectation of 0.5% qoq. That's also the slowest pace since Q4 of 2012. Also from UK, BBA mortgage approvals rose to 38.8k in March versus expectation of 37.9k. Index of services rose 0.7% 3mo3m in February, inline with consensus. While the pound is mildly lower, it's help well above near term support against dollar, yen and euro and thus maintains near term bullish outlook. Elsewhere, Japan retail sales dropped -9.7% yoy in March versus expectation of -7.4% yoy. Australian conference board leading index rose 0.5% in February. US will release S&P Case-Shiller house price and consumer confidence later today.
Dollar stays soft ahead FOMC policy decisions on Wednesday. Fed is widely expected to keep policies unchanged. There are talks that after a rather soft Q1, Fed would delay the first rate hike to September. And, that's also subject to the upcoming Q2 data. In particular, policymakers are probably worried about the headwinds from strong dollar and drop in oil investment on the economy. Also, some volatility could be seen on the greenback as triggered by Q1 GDP and April ISM manufacturing to be released later in the week. At this point, dollar index is still bounded in the consolidation pattern started at 100.39 back in March. And, as long as 94.05/30 cluster support holds, the up trend in the dollar index remains intact and another rise is still expected.
Fitch downgraded Japan's rating to A, down one notch from A+ on fiscal concern. As the agency noted, Japan's main sovereign credit and rating weakness is the high and rising level of government debt". It projected "the gross general government debt-to-GDP ratio to rise to 244 per cent of GDP by end-2015, by far the highest ratio of any rated sovereign". Yet, the "A" rating is supported by the country's "exceptionally strong financing flexibility".
Renminbi fell to the lowest level 13 months amidst news that PBOC would begin purchasing of local governments' debts. As Reuters reported, China would soon initiate a round of "Chinese Quantitative Easing (QE)" with the PBOC directly purchasing assets from commercial banks so as to support the upcoming RMB 1 trillion "local government debt swap program". If this materializes, it would further indicate that China has adopted a monetary easing policy stance. Unlike other central banks, such Fed, BOJ and ECB, which implemented QE when interest rates have fallen to zero or below, China's benchmark one-year lending rate has stayed at 5.35% in March following to -25 bps cut. More in PBOC Plans To Buy Local Government Bonds?.