The news bodes badly for the Euro zone’s second largest economy which has been gripped in a series of political and economic protests over the past several months, as it is very likely to produce a negative impact on the Q1 GDP. The EUR/USD however, shrugged off the dour data trading above the 1.2100 figure from the start of  Asian session.  Given the holiday leaden week, the currency market may spend most of its time quietly digesting last week’s data, but there is no doubt that Friday’s NFP report provided a major boost to dollar longs while  ECB’ s reluctance to raise rates aggressively has put  many euro bulls on the defensive. As we wrote in our weekly piece, “the resiliency of the US economy is a sight to behold, as not even $3.00/gallon gasoline nor the quickly approaching 7% 30 year mortgage are able to slow down the pace of expansion.”  If NFP’s continue to generate 200K+ results throughout the summer season,  dollar may well rally to test its two year highs against the euro confounding most of the greenback bears expecting a slowdown of the US economy.
However, as we also noted in the weekly, “the critical question facing greenback bulls is whether the results for March represented peak values as the typically lagging labor market was simply too slow to adjust to rising costs of money and fuel. This week’s Advanced Retail Sales may go a long way to either confirming or negating that thesis. The wage component of Friday’s report was one of the few sour spots for dollar longs as income increased only 0.2% versus 0.4% the month prior. Given that dynamic it will be interesting to see if Mr. and Mrs. Consumer continue to spend money at Wal-Mart as the cost of filling up their SUV climbs to above $100 per tank.”
Meanwhile, across the Pacific, Japan continues to post quietly impressive numbers with Machine Tools orders rising 3.4% on month over month basis – above the 3.2% expected. Additionally, the Eco Watchers survey registered its best reading in well over 6 years printing at 57.3 suggesting that the Japanese consumer confidence is improving to such an extent that a move away from ZIRP by BOJ is unlikely to dampen sentiment or curtail spending going forward. All eyes will be now on BOJ which concludes its monthly meeting tomorrow as traders try to gauge the Central Banks willingness to move to a more hawkish monetary posture, declaring the country’s decade long battle with deflation officially over.

 FX Spot Overnight
- EUR trades above 2100 all night
- JPY hovers at 118.45 within the close of Friday
- GBP above 7450 as PPI in line
- CHF breaks below 3000