* The dollar fell versus most key currencies on Monday. Risk sentiment improved after better-than-expected economic data across the globe. PMI figures rose more than expected in China, Europe and the US, indicating the global economy is recovering. Still, stocks pared earlier strong gains after Jon Greenlee, associate director of the Fed’s Division of Banking Supervision and Regulation, said “the condition of the banking system is far from robust.” The S&P 500 rose 6.69 to 1,042.88. The yen was pressured by better risk appetite. The euro was up but unable to stay above the 1.48 handle. Sterling was little changed. The strong UK manufacturing PMI supported the pound, but worries about the UK banking sector and speculation the Bank of England will expand its quantitative easing program when it meets on Thursday weighted on the currency. The Canadian dollar rose modestly as commodity and crude prices increased.
* The AUD/USD rose ahead of Tuesday’s Reserve Bank of Australia rate decision meeting. The central bank is expected to raise its key rate 25 basis points to 3.50%, but the risk could be that the hawkish RBA may hike 50 basis points. Yesterday the government upgraded its fiscal and economic forecasts. The Australian dollar is also supported by strong commodity prices and Chinese strong economic growth. The pair has reduced its overbought condition and remained in a strong uptrend. As long as the uptrend is not broken, we stay with the pair.
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