• Dollar Selloff Continues On Widening Deficit, Thin TIC
• Pound Stabilizes On High Claims
• Japanese Machine Orders Take A Bank Seat To Rate Speculation

US Dollar
A row of positive indicators from the US fundamental calendar couldn't take the sting out of yesterday's record current account deficit leaving the dollar to continue its path lower against the majors.  Headlining the slew of data off the newswire was January's TICS numbers which, despite coming in above expectations, confirmed dollar-bulls fears that net foreign capital inflows would be unable to cover the record $68.5 billion trade deficit for the same month.  For months former Fed Chairman Greenspan had repeatedly stated that the yawning deficit's funding by foreign investment was unsustainable, and his omen has finally come to pass.  Delving into today's release, the most appealing US asset for investors abroad were more risky equities, while usually dominate treasuries took a backseat.  Incidentally, this suggests that as the FOMC eventually moves to a more neutral monetary policy regime, the usually dependable TICS data will offer even less of a helping hand in the future while the trade gap remains firmly in forecasts.  In other news, the Fed's Beige Book reported the economy expanded at a "moderate" pace across much of the US over January and February.  Largely watched for commentary on the condition of the job market, factory utilization and inflation; the book has all but secured another quarter point rate hike at the next fed meeting two weeks from now.  The central bank reported growing consumer and business spending, consistent with rising employment.  However, wages were reportedly little changed, and taken with the continually cooling housing market, this further cements speculation that the unquenchable quarter-base rate hikes will need to come to an end.  Additionally, February's import price index revealed the cost of foreign goods dipped in for the month despite the resurgence in energy products.  Also, manufacturing activity in the New York-region accelerated to its fastest pace since May of 2004 while managers anticipate healthy expansion for months to come.

Euro
A barren European calendar allowed the euro to capitalize on dollar selling in the morning hours of the New York session.  The only event from the region that could have registered on traders' radars was the inklings of a break in the strike by public workers over longer work weeks.  Public sector workers have been on strike for over four weeks after the government announced plans to extend work weeks from 38.5 to 39.2 hours without offering additional compensation for additional time.  Today's break came from the state of Lower Saxony where the region's workers agreed with local authorities to accept the conditions.  The proposal of longer work weeks was a hot election issue offered by Chancellor Angela Merkel's Christian Democrats to help stimulate the economy.  Tomorrow's docket will be a little more market moving than today's with February inflation figures announced for the Euro-Zone.  The Bloomberg 2.3 percent consensus, while lower than the previous month's figure, remains above the ECB's 2 percent target rate. Policy officials at the central bank have increased the benchmark lending rate twice from over two-years of consistently holding lending rates unchanged at 2.0 percent.  If growth and inflation indicators remain present over the next two months, further interest rate hikes could be in store further decreasing the currency's appeal as the short side of carry trades.

British Pound
The pound made a relatively reserved advance against its US counterpart despite the latter's economic woes today.  A series of mixed indicators was tainted in the London morning hours after February jobless claims surged 14,600, the most in 13 years.   The results more than quadrupled more conservative estimates and suggest the central bank's estimates of growth for the current year may be an optimistic forecast.  February's fillings for unemployment benefits were the result of three consecutive months of declines in total employment through January and equally weak wage growth.  Average earnings held stable from the previous month growing 3.5 percent, near its slowest pace over two years; while manufacturing wages contracted for the first month in six.  Looking ahead for the job market, there seems to be little supporting a return to hiring by managers with consumer spending last year at its slowest pace in 10 year.  Offering the sole bright spot for the otherwise dreary news day was the country's leading indicator index for January.  Improvements in the consumer confidence, productivity and consumer confidence helped offset declines in business order volume to nudge the composite index to 133.6 from 133.3 in the previous month.

Japanese Yen
Following up on yesterday's strong rally, a light release schedule offered a day of rest for yen traders.  The only indicator for the market to absorb for the session was offered through the final report of machine tool orders in February.  Orders rose 5.6 percent from the same month a year earlier with huge swells in bookings for steel, transport and precision machinery.  Domestic tool orders are particularly important for the largely factory-based economy by revealing plans by Japanese companies to increase production capacity and increase its labor force and wage levels in the process.  In other parts of the economy, speculation over when the long-awaited interest rate hike would take place was offered mixed signals from the government and central bank.  Bank of Japan Deputy Governor Toshiro Muto said that the central bank's idea of consumer price stability, defined by a 0 and 2 percent band, didn't necessarily mean that policy officials would stick to the current, ultra-loose regime until inflation actually topped this range.  However, hours later and politics as usual, Japan's Economics and Financial Services Minister said the BoJ and government were on the same page for the economy and mild deflation remains an impediment. 

Kathy Lien is the Chief Currency Strategist at FXCM.