Dollar struggles to maintain recent gains
Tuesday 18 April, 2023
Daily Currency UpdateAfter two consecutive days of strong gains against its major rivals the USD is now struggling to attract investors as a safe haven currency. Positive economic data out of China today has helped to ease concerns over a potential global economic slowdown. This has, in turn, led to a decline in the stability of the US dollar. The dollar index (DXY) is trading around the 101.820 mark. Data released today for the US showed that housing starts decreased by 0.8% in March from February's revised figure of 7.3%. This reading came in significantly below the market's expected increase of 0.4%. There is a 90% chance of the Federal Reserve increasing rates by 25 basis points.
Key MoversEUR/USD fell from 1.0980 to 1.0957, giving up a portion of its gains. Data released out of the Eurozone today revealed the Eurozone Zentrum für Europäische Wirtschaftsforschung (ZEW) economic sentiment index declined to 6.4 from the previous print of 10.0 and came in worse than the analyst prediction of 13.0. At the same time, the German ZEW economic sentiment index fell sharply in April, coming in at 4.1 after its previous figure of 13.0, with the market expecting 15.3.
The sterling trades around 1.24340 against the dollar as it appears to have ended a two-day decline from its one-week low on Monday. The Office for National Statistics Following released strong wage growth data from the UK which showed that average earnings rose by 5.9% during a three-month period ending in February. Meanwhile, labor costs increased by 6.6%, and both earnings and labor cost figures exceeded market expectations. These impressive wage growth figures have largely outweighed the rise in the jobless rate and the expected surge in the number of people claiming unemployment benefits. The pound is benefitting from the overall positive mood in the market, which is undermining the US dollar as a safe haven currency.
The Loonie remained relatively stable against the US dollar with the pair trading at around 1.33950, while the greenback experienced overall declines. Today’s focus was on the latest Canadian data release which revealed inflation had decreased to its lowest level in 19 months. Statistics Canada revealed the Consumer Price Index (CPI) dropped from 5.2% in February to 4.3% in March, in line with market expectations. Furthermore, core CPI, which excludes the prices of food and energy, decreased from 4.7% in February to 4.3%. Following the release of today's data, markets maintain their expectation of a 10% probability that the Bank of Canada will raise its benchmark interest rate by 25 basis points at its upcoming meeting on June 7th. The central bank anticipates that inflation will fall to approximately 3% by mid-year and has affirmed its readiness to implement further tightening measures to restore inflation to its target of 2%. The price of oil trades near 80.890 per barrel as the latest selling pressure is dragging the price of oil down.
- EUR/USD: 1.0912 - 1.098 ▲
- GBP/USD: 1.2354 - 1.2448 ▲
- AUD/USD: 0.669 - 0.6744 ▲
- USD/CAD: 1.3361 - 1.341 ▼