The U.S. Dollar is tumbling in the face of mixed economic data and dovish commentary from a Fed official.
Consumer Price Index and Retail Sales came out better than expected with CPI for the year growing from 1.7% to 1.8% annual growth.
Consumer spending must be up as Retail Sales met its October expansion of 0.2% and the prior month’s stellar reading of 1.6% was revised upward to 1.9%. However, Empire Manufacturing survey came in much lower than estimated, suggesting pessimism in the imperative New York region.
Additionally, Chicago Fed President Charles Evans is concerned about the low level of inflation being below 2.0% for the year and believes the economy may not be growing as fast as believed to merit further monetary tightening. Per the Bloomberg Dollar Spot Index, the buck has declined to its weakest level against its ten main counterparts since mid-October. Political distractions are also hurting the dollar as legislative elections and agenda face controversies.
The Euro increased to its best level since October 11th, primarily gaining as stock indexes headed downwards and U.S. data failed to spark a dollar comeback. The shared currency is now on a winning streak that represents its fastest weekly appreciation in about three months.
Suddenly, the accommodative environment of the Euro-zone is regarded as a Euro-positive development, counter to the typical fall of a currency when no interest hikes are expected in sight. The European Central Bank may not raise rates until 2019, but the financial stability of the region is attractive to those seeking refuge from riskier assets and the uncertainties plaguing U.S. economic advancement.
The Japanese Yen’s value has gone up by 1.2% since the start of the month, rising as the risk-appetite that characterized October disappears. The lack of gains in stock exchanges is helping propel the Yen as the safe-haven that it is known to be during times of stress.
Yen fluctuations this year have mostly been affected by this dynamic along with the fear of conflict in dealing with the threats of a nuclear-armed North Korea. With Shinzo Abe holding the reigns, the Yen is subject to declining on the basis of dovish monetary policy and expansionary fiscal expenditures. However, as long as markets act with fear, Yen will remain a staple of financial stability.