The U.S dollar was under heavy pressure yesterday following developments abroad. The greenback also sold off on reports that Goldman Sachs Group Inc. dropped their long-held long dollar positions, citing a slowdown in “reflation” in the U.S. economy. Slow housing starts poured more cold water on the greenback.
The U.S. dollar has attempted to get its groove back this morning, clawing back gains against the majority of its rivals. Indeed, the Bloomberg Dollar Spot Index halved Tuesday’s losses. The U.S. dollar has continued its rally against the Australian dollar and other commodity-based currencies as iron ore has extended its declines.
Today’s docket remains light. This afternoon the Federal Reserve will release its Beige Book which is unlikely to have a material impact on the buck. The Fed’s Eric Rosengren is slated to speak at a conference at Bard College this afternoon as well.
The Euro popped higher against the U.S. dollar yesterday on broad dollar weakness. The move was damped by increasing uncertainty over the French election. For months, polls have shown Independent (centrist) candidate Macron and the National Front’s (nationalist, far-right) Marine Le Pen as the two expected candidates to emerge from this weekend’s first round election. However, the emergence of Jean-Luc Melenchon (communist, far-left) as a possible top-two vote getter has markets worries. Some analysts have suggested a final match-up between Melenchon v. Le Pen is the “worst-case scenario” for markets and the Euro.
The British pound continued its momentum throughout the day yesterday, rising over 2.0% versus the U.S. dollar. The sterling soared after Prime Minister Theresa May’s surprise announcement that there will be a snap election in June. According to recent polls, May is likely to consolidate power in the U.K. parliament, strengthening her “Brexit” negotiating hand.
The next major risk event for the sterling is Friday’s retail sales.