After reversing some of its gains on Friday, the U.S. dollar seems to have its groove back and is gaining across the board.
The dollar gained most of last week, but struggled on Friday even after strong GDP data. We are seeing low liquidity trading as markets in Japan and China are closed today and many European markets will be closed tomorrow for “May Day.”
This morning’s economic data showed that U.S. consumer spending picked up in March. Purchases rose 0.4% from the prior month, meeting expectations. Personal income however, registered at 0.3%, failing to meet the 0.4% expected rise. A separate report showed that the Fed’s favorite inflation gauge hit the central bank’s 2.0% target for the first time in a year.
The economic docket for the rest of the week remains busy. Tomorrow, manufacturing PMI and Manufacturing and construction spending will cross the wire. ADP private jobs data are due out Wednesday morning. The Federal Reserve will announce their interest rate decision at 2 pm on Wednesday. No change is expected but traders will look for clues to future rate hikes later this year. Non-Farm payrolls will highlight the week’s economic data on Friday morning.
The Euro showed moderate signs on life on Friday but has begun the week on its back foot against the U.S. dollar. The Euro is now sitting right at a three-month low against the U.S. dollar. The common currency was under pressure after a report showed German retail sales fell 0.6% month over month in March. The print fell well below expectations of a 0.8% gain.
EUR/USD has continued to try to carve out a new, lower range over the past two weeks. There is plenty of news on this week’s docket that will likely set the tone for the month of May.
The Sterling was the only G10 currency to lose to the U.S. Dollar on Friday and its negative momentum has continued in early trading. The newest downward pressure against the sterling comes after the resignation of U.K. Home Secretary Rudd over the weekend. Rudd’s replacement will be Sajid Javid who is a euro-skeptic. The switch in May’s cabinet shifts the power to a more anti-European sentiment and exacerbates political risks.
U.K. markets will be closed tomorrow.