The U. Dollar strengthened against the Euro as reports showed that record exports and a reduction in oil purchases helped narrow the trade deficit. This returned confidence that the U.S. economy is not faltering. As a result of the positive data, investors sought the U.S. Dollar on expectations that trade will fuel growth in the second quarter of the year. In addition, Consumer Confidence improved amidst Americans who earn less than $50,000.00. Other metrics issued yesterday indicated that U.S. Wholesale Inventories rose less than anticipated in the month of April; figures show that they went up by 0.8 percent after increasing 1.3 percent in March. However, the U.S. Department of Labor showed that more people applied for Unemployment Compensation last week. In addition, as U.S. Home Prices plummeted 33 percent in 20 cities through March, Robert Shiller, the economist who co-founded the S & P/Case-Shiller Index of U.S. Home Prices, stated that he would not be shocked if prices continued on their downward trend. There’s a backlog of foreclosures which will reflect a housing market that’s still depressed. The Canadian Dollar advanced on the positive news revealing a narrowing of the U.S. Trade Deficit. The Loonie rose against 15 of its peers as crude oil prices increased. The Canadian currency strengthened versus the Euro after the ECB erased bets over interest rate expectations in the near future.
Meanwhile, the Euro fell following the European Central Bank’s decision to forego on raising interest rates until the month of July. Officials commented that inflation will probably grow between 1.1 and 2.3 percent; this however dampened the chances of a possible hike in interest rates. The Bank of England also kept its benchmark rate unchanged at 0.5 percent –results which were highly anticipated. The Sterling gained against the Euro as the gilts increased and traders favored the English currency over the Euro. The Pound strengthened against most of its 16 trading counterparts and posted the biggest increase versus the Swiss Franc. Gains were short-lived as dampened expectations caused a dip in the British monetary unit.
In the South Pacific, the New Zealand Dollar traded at a record high versus the U.S. currency as the country’s central bank stated that commodity prices remain extremely strong and they may raise interest rates in the following two years. For now, the Reserve Bank of New Zealand left the rates unchanged at 2.5 percent. Australia’s currency dropped on the less than stellar Unemployment stats which showed that the labor sector only added 7,800 jobs in May though there were 22,000 full time positions lost.
In Japan, economic data revealed that the country’s Tertiary Industry increased 2.7 percent in April and investors await the release of the Bank of Japan’s Corporate Goods Price Index for the month of May.
EUR/USD- ECB Left Rates Unchanged On Inflation Outlook
The Euro fell against the U.S. currency as the European Central Bank indicated that inflation is likely to dip below the 2 percent limit in the next year. This obviously boosted speculations that the ECB will not increase interest rates at any time soon. Analysts believe that the strength of the shared currency will depend on potential rate increases. Mr. Trichet’s remarks appeared bullish but were overall dovish. Meanwhile, there’s still palpable tension as Germany has not issued a decision in regards to the second bail-out package for Greece. The Euro continued to fall as Trichet emphasized that the central bank is not in favor of restructuring the loan.
GPB/USD- Pound Rallied Versus Its Peers
The Pound Sterling advanced against most of its peers and recouped most of its losses versus the Euro. Britain’s central bank kept the interest rates at 0.5 percent. However, the British Pound slid on diminishing expectations over an interest rate hike. Furthermore, it all seems to indicate that the BoE refrained from issuing a policy statement due to an unchanged growth outlook for the second quarter.
AUD/USD- Weak Employment Reports
The Australian dollar slumped to a two week low as employment reports confirmed that the economy has slowed down, thereby boosting sentiment that the Reserve Bank of Australia may be inclined to alter interest rates. Metrics showed that employers added fewer jobs than expected and there was a big loss in the full-time sector.
USD/CAD- Loonie Strengthened On U.S. Trade
A rise in crude oil prices benefited the Canadian currency. Furthermore, reports that the U.S. Trade gap narrowed caused the currency to increase against most of its peers. FX reports showed that the Merchandise Trade figures did not dampen the Loonie’s rally. As analysts usually say, positive data for the U.S. always has a good effect on Canada. Crude oil jumped to $101.79 a barrel in New York.
Today’s economic calendar shows that the U.K. will report on Industrial Production and issue Inflation Expectations along with PPI Input and Output. Canada will release Unemployment Rate and Changes in Employment. The U.S. will issue the Federal Budget Balance and its Import Price Index. The E.U. will issue the German Consumer Price Index, French Industrial Production and Italian GDP.