Home Daily Commentaries The Greenback plunges due to a less pessimistic European Central Bank

The Greenback plunges due to a less pessimistic European Central Bank

Daily Currency Update

USD - United States DollarThe US dollar index falls 0.43 percent at the time of this writing. Non-farm business sector labor productivity increased 3.4 percent in the first quarter less than the expected 3.5 percent. At the same time, the number of Americans filing applications for unemployment benefits was unchanged last week; the data suggested the labor market remains on solid footing despite slowing economic activity. Initial claims for state unemployment benefits were unchanged at 218,000 for the week ended June 1.The other piece of data comes from the trade balance. The US trade deficit for goods and services narrowed $1.1 billion in April to just $50.8 billion, meeting the consensus forecast. However, the US dollar falls due to a stronger Euro, please see the key movers part.

Key Movers

The Euro rises as the ECB pushes back the rate hike deadline and raises the inflation forecast. The ECB said interest rates on its marginal lending facility and the deposit facility would remain unchanged at 0 percent, 0.25 percent and -0.40 percent, respectively. On top of that, ECB president Mario Draghi signaled a burst of monetary support before his term ends in October. Some key points that pushed the Euro higher at the time of the release include: data about the economy are not bad; there is no probability of deflation; the drop in market-based inflation expectations is global; and, there isn't a substantial worsening in the outlook. Draghi mentioned, "the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets is leaving its mark on economic sentiment." In general, the ECB and Draghi's message were not as dovish as the market was expecting. Officials from Mexico met with their US counterparts to discuss avoiding tariffs, and US adviser Peter Navarro said it could happen if the country agrees to take asylum seekers and boost security in its border with Guatemala. On the flip side, Senate Republicans have threatened to block President Trump's planned tariffs on Mexico. "There is not much support in my conference for tariffs," Senate Majority Leader Mitch McConnell said. However, president Trump noted that lawmakers would be making a mistake if they try to stop him.

Expected Ranges

  • USD/CAD: 1.3360 - 1.3410 ▼
  • EUR/USD: 1.1230 - 1.1323 ▲
  • GBP/USD: 1.2674 - 1.2744 ▲
  • AUD/USD: 0.6957 - 0.7028 ▲
  • NZD/USD: 0.6613 - 0.6652 ▲