Daily Report: US Dollar Trading Mixed Against The Majors

The U.S. Dollar traded mixed against most of the majors at the end of last week, after global equities fell by more than $1 trillion, and as the group of 20 finance ministers and central bankers met in Washington, D.C. U.S. economic reports turned out to be disappointing, especially as the Federal Reserve Bank of Philadelphia showed that the index for manufacturing dropped from 2 to 1.3 in April and Jobless Claims for the week that concluded on April 13 revealed an increase of 4,000 up to 352,000. This occurred while the U.S. experienced what has been deemed the worst industrial accident since 2010 where, in Texas, the explosion of a fertilizer factory left more than 150 people injured and flattened houses which devastated a small town.

The greenback rose against several of its trading counterparts after the G-20 agreed to allow Japan to engage in the unprecedented monetary easing measures that were recently announced. In the days to come, market investors will pay close attention to U.S. releases which are expected to show that Consumer Spending rallied dramatically, possibly the most in two years, while Housing improved as well. Meanwhile, Canada’s Dollar dropped the most in close to two months versus its American peer following a big decline in commodities, and as domestic data suggested that the world’s 11th biggest economy has lost its momentum. According to the Standard & Poor’s GSCI Index, 24 commodities dipped 2.5 percent while crude oil, the country’s largest export, slipped to $88.01 per barrel.

The Euro erased early session gains on Friday as the group of 20 Ministers and central bankers provided Japan with leeway to forge ahead with the current easing measures. However, it recouped its footing versus the greenback after U.S. reports signaled the economy’s recovery has slowed. The shared currency rallied throughout the day despite the ongoing political gridlock in Italy. This coming week, Italy will vote for a new President even as most of the candidates failed to obtain the needed two-thirds majority. The U.S. Dollar weakened versus most of the risk assets like the Euro subsequent to news on the Boston bombings. In Great Britain, the Pound plunged against the U.S. Dollar after the Fitch Ratings agency cut the U.K.’s credit from AAA to AA+. The downgrade followed comments by International Monetary Fund officials who suggested the U.K. should cut back on some of the current austerity plans while the economy is showing weaknesses.

According to analysts, this past week saw many exciting developments in the markets. High-yield assets rallied on optimism that Japan is ready to go on a major shopping spree, especially as the G-20 gave Japan the green light to continue with its unprecedented aggressive monetary easing program. And as risk appetite improved, the Yen fell against the U.S. Dollar and the Euro. The Yen remained low after the Director of the International Monetary Fund, Christine Lagarde commented that Japan’s plan constitutes a “positive step,” but she suggested the nation may need to implement other measures in order to lower its debt.

Lastly, in the South Pacific, the Australian Dollar traded close to a five-week low at the end of last week as investors continued to worry over the global growth outlook, and as the International Monetary Fund suggested the Aussie is overvalued. New Zealand’s Dollar rose versus the majority of its counterparts after an economist from the Chinese government indicated that the economy may show improvement during the second or third quarters of 2013.

EUR/USD- Risk Appetite Bolsters Euro
The Euro rallied against the U.S. Dollar as risk appetite improved in the market, but it dropped after the G-20 indicated Japan may continue with its aggressive monetary policies. In the middle of the week, the International Monetary Fund suggested the Euro-zone was perhaps a big threat to global growth; the shared currency fell over 1percent as a council member of the European Central Bank, Jens Weidmann, spoke of interest rate cuts. However, the Euro reached session highs once he reiterated the central bank will only lower the key cash rate if future data points to the worsening of the economy.
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GBP/USD- Retail Sales Fall
The British Pound was affected by two major factors which prompted it to weaken against the greenback. For starters, Fitch Ratings downgraded its triple A rating to AA+ and cited the nation’s poor economic outlook as the main reason. Secondly, official reports indicated that Retail Sales slipped 0.7 percent MoM in March, while they climbed 2.1 percent in the prior month. In the week ahead, investors will follow economic releases on the U.K.’s first quarter growth.
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USD/CAD- Loonie Tumbles On Commodities
Canada’s Dollar fell the most in close to 8 weeks against its American peer as the S & P’s Commodities Index revealed that 24 commodities slipped 2.5 percent. Futures on crude oil, the country’s biggest export declined as well and at one point, reached $85.61, the lowest price in 2013. The Loonie remained under pressure since raw materials account for close to half of the country’s export income. Drops in gold prices pushed the U.S. currency’s value up, while copper and aluminum, two metals mined in Canada dipped in price and weighed on the Canadian monetary unit. On Tuesday of last week, the International Monetary Fund revised down its predictions for Canada’s economic growth from 1.8 to 1.5 percent and urged the central bank to refrain from increasing the costs of borrowing money.
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AUD/USD- Aussie May Be Overvalued
Australia’s Dollar traded at a five-week low versus the greenback at the end of last week following comments by the International Monetary Fund suggesting the currency is “overvalued.” Investors grew concerned about the global economic outlook after the IMF indicated that the world’s economies may only expand 3.3 percent. The IMF intimated that China’s expansion may be limited to 8 percent, while the U.S. may only grow 1.9 instead of 2 percent. The Aussie remained under pressure as Min Zhu, the Deputy Managing Director of the IMF said that the Aussie may be overpriced by about 10 percent.
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Today’s Outlook
Today’s economic calendar shows that the Euro region will report on Consumer Confidence. The U.S. will release data on Existing Home Sales. And China will announce the HSBC Manufacturing PMI.