The euro came under pressure today to trim post-FOMC gains made against the dollar that took the single currency to a one-month high above $1.13 yesterday. Meanwhile, weaker-than-expected producer price index data (PPI) from Germany and dovish comments from ECB Governing Council member Peter Praet also weighed on the single currency.
German PPI decreased 3.0% year-over-year in February, which was more than the 2.6% drop economists expected. In January prices fell 2.4%. PPI also fell on a month-on-month basis, by 0.5% last month but was slower than January’s 0.7% drop and less than the expected 0.1% decline.
The euro continued its decline in response to comments made by ECB’s Praet, who said in an interview today that the central bank could add further stimulus if needed, implying that interest rates could be cut again. Such verbal intervention succeeded in bringing down the euro to a session low of $1.1255 where it steadied but remained below $1.13 for the rest of the session.
Sterling retested the key $1.45 level today, surpassing yesterday’s high to register a new one-month high. The pound has been rising since the Federal Reserve’s dovish stance on Wednesday, compounded with a more hawkish Bank of England on Thursday, and this helped buoy the British currency. The BoE held policy but its meeting minutes signaled that interest rates were more likely to rise than not.
However, the pound’s gains could fade going forward as Brexit concerns will likely return to the fore. For now a broadly weaker dollar is helping lend support to sterling after the Fed did not raise rates at its latest meeting on Wednesday and it wound back expectations for future increases this year.
The Canadian dollar was in focus today as it reached its strongest level in five months against its US counterpart. The loonie was given a boost after much stronger-than-expected Canadian retail sales data which showed a 2.1% surge month-on-month in January. This exceeded analysts’ expectations of a 0.6% rise and recovered December’s 2.2% decline. Meanwhile, excluding autos, retail sales also beat forecasts to rise 1.2%. Analysts expected a 0.4% rise to reverse the prior 1.6% drop. The upbeat data today would likely be good news for the Bank of Canada as GDP would be boosted in the first quarter. This in turn would prevent the BoC from cutting rates. The expectation that at least the central bank would hold rates, lent support to the Canadian currency. USDCAD fell to 1.2922 after the data before steadying. Meanwhile, rising oil prices also helped the oil-sensitive loonie. US oil futures continued to rise today to reach $41 a barrel.
Out of the US, the preliminary University of Michigan consumer sentiment index for March was released. The index slid to a five-month low of 90 in March from 91.7 in February. Forecasts were for a reading of 92.2. The downbeat sentiment data weighed on the dollar although it remained above 111 yen today.
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