The U.S. Dollar is holding steady after another week of up-&-down swings led by mixed data that rewarded, and eventually sank currencies’ gains across the board.
A sense of caution hit markets this week as market participants gauged the high level of FX as we as equity volatility.
U.S. Treasury bond yields went down, which hurt the dollar as investors look towards other buying opportunities in regions that are close to exercise monetary tightening. As interest rates are bound to increase elsewhere, this makes the dollar less attractive. However, uncertainties over Brexit and political issues in Euro-zone countries have caused many to remove their long bets on GBP and EUR after their dramatic resurgence in January. Thus far in February, the buck has a slight advantage.
Without any major data, we shall see if the greenback can close out the week sustaining its advancement. End of month next week brings us imperative data in the form of Gross Domestic Product and March will start with the release of Income figures, a must-see since the Fed has highlighted the need to closely monitor wage improvements or collapses.
The Euro slid yesterday, but recovered slightly overnight and then fell some more. The shared currency depreciated by 1.0% throughout the week based on positivity tied to the FOMC Minutes and concerns over Germany’s ongoing situation in regards to Merkel’s coalition.
We look ahead to March 8th, when the European Central Bank is set to announce its policy decision. Expectation is that they will remain on a “wait-and-see” mode, so statements from officials will likely come through the wire in the next two weeks that if counter to what is predicted, could cause even wilder fluctuations.
The Canadian Dollar lost 1.0% of its value this week, primarily as a result of data that failed to meet expectations and led traders to believe that the Bank of Canada may hold back on interest hikes. Retail Sales for December were supposed to show no expansion or contraction, but indeed fell (-0.8%).
The slowdown to the economic activity was somewhat expected by the BOC, but the effect to the CAD is real. Overall for the year, Canadian Dollar is likely to experience plenty of obstacles with the threat to NAFTA still hanging and potential downtime for the commodity markets as the year progresses.