The US dollar was well-bid following Wednesday’s strong housing numbers and Wall Street’s rally, which pushed up Treasury yields. This underlined the yield advantage that the greenback is enjoying versus other majors. Gold also fell sharply to around 1185 dollars an ounce because of the rebound in the US dollar and positive risk sentiment.
Although there were some indications of an improvement in the atmosphere regarding the Greek debt negotiations, the euro fell below 1.07 once more. German 10-year bond yields also moved higher to around 15 basis points from under 10 basis points, but again, the euro failed to benefit.
The New Zealand dollar dropped sharply today after the Assistant Governor of the Reserve Bank said that an interest rate cut would be put back on the table if domestic demand and inflation prove weak. Assistant Governor McDermott also said the kiwi was overvalued. The currency lost around 1 cent against the US dollar, as it fell from 0.7660 to 0.7560. The closely watched aussie / kiwi rate headed further away from parity at 1.0230.
However, the aussie itself was also under some pressure after disappointing preliminary HSBC Manufacturing PMI for April out of China. The survey index came in at 49.2 instead of 49.6, which was the prior month’s reading and the number expected by economists. Equities – particularly in China – were somewhat encouraged by the data as it indicated that additional stimulus could be forthcoming. The aussie traded around 0.7740 against the dollar.
Talking about countries where additional stimulus is possible, the yen was also hurt a little by a retreat in the flash Manufacturing PMI number for April out of Japan. The index fell into contraction territory at 49.7 from 50.3 the previous month. Dollar / yen was around the 120 level.
Looking ahead, it will be a relatively busy European session because of the flash PMI business surveys out of the eurozone. Data out of France, Germany and the eurozone as a whole will be closely scrutinized for clues that the region is feeling the benefits of a weaker euro and quantitative easing. A little later, retail sales out of the United Kingdom will likely affect sterling, while afterwards during the US session, jobless claims, flash manufacturing PMI and new home sales for March will be on the agenda. Housing market activity has been strong recently as many US consumers try to secure mortgage financing before the Fed starts to increase interest rates.