The swings of April, and really for this year, continue as the U.S. Dollar finds itself in the same position as yesterday morning after having gained against Euro and other currencies across the board based on positive construction data.
Nevertheless, the afternoon session saw those gains be erased, so the benefits and greenback strengthening were very short-lived. We are stuck in these ranges because of ongoing developments on free trade, geopolitical events concerning Russia and the Korean Peninsula, as well as technical positions that traders are bankers use for profit.
News of progress in North Korea are certainly causing cheer across equity markets all around the globe, yet FX remains low in terms of volatility. We shall see if any headlines aid or significantly hurt the dollar as economic data seems to have a short-lasting effect one way or the other. Poor data in the Euro-zone is not causing any dents and any time Pound goes down, it rises with vengeance.
The Euro is resisting declining although underwhelming inflationary growth may prove to be a factor that dissuades the European Central Bank from exercising monetary tightening. Consumer Price Index figures for March came in lower than expected at 1.3% under 1.4%, while its February number was revised downward.
The ECB will meet on March 26th and could seem dovish in the face of slower expansion of economic indicators in the region. It is worth noting that the International Monetary Fund seemed dovish in its outlook for economic growth, while giving the U.S. an upgrade. This had moved the dollar higher against the Euro yesterday, however the effect went away. If the ECB confirms concerns of a slower economy, then this may come back as evidence of what the IMF called out and aid the buck.
The Pound was the biggest mover of the night as the UK’s inflationary data also disappointed. CPI for the month of March only increased by 0.1% as 0.3% was estimated, subsequently bringing the yearly average down from 2.7% to 2.5%.
Sterling is down by over half a percent on the news, but this may be due to the slow news cycle in the region as Brexit negotiations will not resume until Monday. This drop for Pound may not last long since traders speculate that the Bank of England will not hesitate to raise interest rates next month. Chances of a hike stand at 82.4% for the May 10th meeting.