The U.S. Dollar continued its losing streak this morning following based on solid data in other regions and political headlines in the U.S. Markets rewarded the Euro over the greenback after solid Gross Domestic Product and inflationary data suggested that the economic recovery in the trading bloc is now consistent and that downside risks related to elections have vanished for the most part.
Meanwhile, the dollar is likely to continue floundering as headlines related to current administration woes take center stage. The “buck” has lost its lust in the eyes of investors as distractions have taken away from America’s path towards infrastructure spending and tax reform, which drove the dollar higher for months after November.
We foresee some struggles for the USD in the next few weeks as we muddle through some unchartered waters. Oil prices are likely going to fluctuate wildly as OPEC figures out to what extent they can keep curtailing production and compete with North American output. Canadian Dollar and Mexican Peso have recovered some ground the past few days, notably MXN improved by 2.5% in the last nine days.
The Euro surged to its highest level in about seven months as a result of increased faith in the Euro-bloc’s ability to stay on course economically. Although the European Central Bank said it is not ready to consider tightening its monetary policy, characterized by 0.0% rates and easing measures, the central bank officials are likely to speak in a positive tone moving forward.
Consumer Price Index figures were released this morning showing a 1.9% pace of yearly growth, just slightly under the desired 2.0% the ECB has aimed for throughout the last few years. We feel that the Euro deserves to be given credit, but any ongoing struggles related to the periphery such as Greece’s debt repayment and Italian stagnation will weigh on the shared currency if no resolution in sight.
The Pound appreciated on the based on general dollar weakening and the lowest unemployment rate in the UK since 1975. The jobless rate fell to 4.6%, but economic data came with a caveat as wage numbers underwhelmed and revealed what many economists feared: Brexit uncertainty has deteriorated the labor sector and negatively impacted households.
Wages adjusted to inflation fell 0.2% in Q1, mostly caused by a half percent drop in March. Bank of England Mark Carney’s predictions are starting to become reality in the midst of talks, which so far have left a lot to be desired. GBP gains may be subdued and we still look for downward action down the line.