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    European Session – Euro rallies to 1.14 as dollar under pressure

    The euro rallied to its highest level against the greenback in five months to 1.1411, helped by a broadly weaker dollar. The greenback remained under pressure on the last day of the first quarter of the year.

    The euro’s rise did not appear to be impacted much by data out of the Eurozone today. Flash CPI data for the region showed some improvement at -0.1% year-on-year in March from -0.2% y/y in February. While this was in line with expectations, the data indicate that consumer prices in the Eurozone fell for a second consecutive month. Meanwhile, other data showed that German employment and retail sales figures came in lower than expected.

    Other economic releases during the European session today came from the United Kingdom. The upbeat Q4 GDP number that was revised to 0.6% quarter-on-quarter from 0.5% q/q helped sterling rise briefly back above $1.4400 versus the dollar. But the gains were modest and short-lived since the UK’s fourth quarter current account deficit widened sharply to -32.7 billion pounds, more than the expected -21.2 billion. Meanwhile, Brexit risks are still a drag on the pound.

    Other data in focus today on US initial jobless claims which showed more Americans filed for unemployment benefits than expected in the week ending March 26. Claims increased by 11,000 to 276,000 versus a forecast for claims to hold at 265,000.

    The US dollar drifted lower after the data, and against the yen it slid to a session low of 112.10 yen. Its decline was halted by an upbeat Chicago PMI number and the dollar rose back up to 112.50 yen. The March PMI reading was better than expected at 53.6 versus the 47.6 estimate and above February’s 47.6 reading.

    The greenback has nevertheless been weaker against most major currency pairs in the past couple of days as it was pressured lower following a dovish speech by Fed Chair Janet Yellen on Tuesday when she talked of a more cautious policy outlook. The US currency is on track for its worst quarter since 2010 as markets scale back their expectations for the number of rate hikes by the Fed this year. Focus will be on the US nonfarm payrolls report out tomorrow.

    The Canadian dollar was given a boost after data showed the Canadian economy grew more than expected in January. GDP rose 0.6% month-on-month to beat estimates of a 0.3% m/m growth rate. Meanwhile the January figure was above December’s 0.2% rate, marking a fourth consecutive month of increases. The evidence of steady growth in the Canadian economy reduces the odds that the Bank of Canada will need to cut interest rates further this year. Following the data, an already falling USDCAD extended its decline to reach a five-month low of $1.2856.

    In commodities, gold edged higher to $1240, helped by the weaker dollar. US oil futures rose too, to reach $39.02.

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