Euro Dropped Broadly On Weidmann's Comments

The euro weakened broadly overnight, as Bundesbank head Weidmann was quoted that ECB could lower interest rates if the eurozone economy worsens. He warned that "overcoming the crisis and the crisis effects will remain a challenge over the next decade." He noted that while the eurozone might recover this year, "the calm that we are currently seeing might be treacherous". The euro was sold off sharply after the comments, with EUR/USD breaching 1.3021 minor support, indicating near term reversal. More importantly, the weakness was rather broad based as the EUR/GBP is way off yesterday's high of 0.8636; the EUR/AUD also dipped from 1.2738. Focus before the end of the week will be on whether the EUR/USD will dip below the 1.3 psychological level again.

The G20 meeting will also be a main focus towards the end of the week. It's reported that the draft statement reiterated the pledge to refrain from competitive devaluation, and to move to market-determined exchange rate systems. Japan will likely escape from direct criticism, even though the yen has weakened drastically in the past few months on expectations of BoJ easing. The draft noted that global outlook is "somewhat weaker and uneven" with "unbalanced" recoveries among developed and emerging economies. The draft noted that "fiscal drag, policy uncertainty, impaired credit intermediation, private deleveraging, and an incomplete rebalancing of global demand continue to weigh on global growth prospects". Iit urged US and Japan to carry out credible plans for medium-term fiscal consolidation.

In China, PBoC deputy Governor Yi Gang said that yuan's trading band will be widened in the near future. Yi pledged that "the exchange-rate regime will continue to reform in the market- oriented direction, and to make market demand and supply, to a large extent, determine the rate." He noted current account surplus as a percentage of GDP "peaked in the 2007-2008 period and has since then declined."

On the data front, Japan trade deficit narrowed to JPY -0.92T in March as expected. Australia NAB business confidence improved to 2 in Q1. U.K. retail sales will be released in European session. On the U.S. data front, focus will be on jobless claims, Philly Fed survey and leading indicators.