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Forex - Dollar slips on slew of disappointing economic indicators

ForexMay 16, 2013 07:34PM GMT Add a Comment
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Investing.com - A second consecutive day of disappointing economic indicators in the U.S. and Europe sent the dollar falling against most major currencies on Thursday, mainly by stoking concerns that the Federal Reserve will keep monetary stimulus tool in place for longer than once anticipated.

Stimulus measures, such as the Fed's monthly USD85 billion bond-buying program, weaken the greenback by flooding the economy full of liquidity to keep interest rates low and encourage investing and hiring.

In U.S. trading on Thursday, EUR/USD was down 0.10% at 1.2875.

The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.

Analysts were expecting the index to improve to a reading of 2.4 in May, which fueled sentiments that loose policies at the Federal Reserve aren't going to wind down anytime soon as did disappointing numbers out of the labor market.

The Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.

Soft inflation data took the steam out of the dollar as well.

The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.

Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.

Spotty data out of the housing industry dampened the dollar as well.

The Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.

U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.

Thursday's data came in wake of soft industrial output and producer-price reports released on Wednesday.

Soft indicators out of Europe, however, cushioned the dollar's losses by bolstering the greenback's use as a safe-haven due to its liquidity.

On Wednesday, official data revealed that the eurozone economy contracted by 0.2% in the three months to March, a little more than analysts' calls for a 0.1% contraction.

Earlier Thursday, the eurozone said its consumer price index rose 1.2% on year in April, in line with expectations.

A separate report revealed that the eurozone posted a record trade surplus in March as imports fell 1% from February, while exports grew 2.8%.

The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.21% at 1.5268.

The dollar erased earlier losses against the yen, with USD/JPY up 0.03% at 102.28, and down against the Swiss franc, with USD/CHF trading down 0.12% at 0.9636.

The dollar was up against its cousins in Canada, Australia and New Zealand, mainly on fears cheaper commodities will cut into growth, with USD/CAD up 0.29% at 1.0188, AUD/USD down 0.83% at 0.9816 and NZD/USD trading down 0.96% at 0.8161.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.01% at 83.90.

On Friday, the U.S. will release preliminary data from the University of Michigan on consumer sentiment and inflation expectations.

Forex - Dollar slips on slew of disappointing economic indicators

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