While it has been and will continue to be an exceedingly quiet morning in the foreign exchange market with most of the major markets closed for the Easter holidays, there were still have a few pieces of U.S. data released this morning.

Personal income rose 1.1% in the month of February while personal spending rose 0.7%. USD/JPY barely reacted to the news because there’s no one trading today but both numbers were better than expected and consistent with a continued recovery in the U.S. economy. The stronger increase in incomes versus spending is also a healthy trend that makes the light at the end of the tunnel shine slightly brighter for the Federal Reserve. The final University of Michigan Consumer Confidence numbers will be released later this morning but no revisions are expected and so the data should be a nonevent for the U.S. dollar.

Now that the situation in Cyprus has been pacified, the focus in Europe has shifted back to Italy where there were rumors that Berlusconi is open to a coalition with Bersani. He has since denied this possibility, saying instead that a grand coalition with an agreement on program reforms is the only acceptable option. Recent polls suggest that 50% of Italians are ready to vote again. While there is no longer any sense of panic around the Italian elections and investors have come to accept the political deadlock, without a functioning government, it remains an uncertainty for the financial markets. If Bersani fails to form a coalition, the earliest new elections can be held will be the summer and until that happens Mario Monti’s government remains in place. The biggest downside of political uncertainty is that it has and will continue to affect investment decisions into the Eurozone especially after the fallout in Cyprus, which is negative for the euro.

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