The U.S. dollar index made some recovery during the European session after dipping to a six-week low of 100.02 in the Asian session. The antipodeans outperformed the greenback while the loonie was weaker today due to lower oil prices in the wake of the Baker Hughes oil rig count. The pound fell sharply on news of the Article 50 trigger date.
In a relatively quiet day in terms of economic data releases, the main news of the day was the announcement of the date that the formal Brexit process will start. It has now been confirmed that the UK government will trigger Article 50 on March 29, thereby formally launching talks to exit the EU. The announcement comes ten months after the Brexit vote.
After rallying to an early session high of $1.2435, sterling dipped below the key $1.2400 level following the announcement. Losses were minimal though as the pound has some support from last week’s Bank of England minutes, while Tuesday’s UK inflation data are expected to show that inflation rose above the BoE's 2% inflation target for the first time since 2013. Headwinds remain for the pound however, with risks around the Brexit negotiations as well as mounting domestic political risks regarding renewed calls for a Scottish referendum on independence.
The euro hit an early session high of $1.0776 before easing slightly to $1.0743 after disappointing data out of Germany. The February PPI reading came in a little below forecast, rising 0.2% versus a 0.4% increase expected and a 0.7% gain in January.
The single currency still remains buoyed by ECB policy makers’ comments in recent days. Today, Governing Council member Ignazio Visco echoed GC member Ewald Nowotny’s positive comments from last week when he indicated that the ECB could raise interest rates before it ends its quantitative easing program.
The dollar paused its decline against the yen after hitting a 3-week low of 112.45 early in the European session. The dollar has been under pressure since the Fed failed to deliver the hawkish message regarding monetary tightening that markets were expecting.
The Aussie rose to its highest level against the greenback since November 9, reaching $0.7747, while the kiwi also outperformed against its U.S. counterpart to hit a high of $0.7072, the highest since March 2.
The Canadian dollar came under pressure today due to a drop in oil prices after last Friday’s Baker Hughes report showed the U.S. oil rig count hitting its highest levels since September 2015. WTI oil struggled below the $49 a barrel level, while Brent crude traded below $52 a barrel. The softer loonie helped lift USD/CAD to $1.3371.
Gold hit an early session high of $1235.38 an ounce, the highest in two weeks before steadying. The precious metal has been rallying since the March 15 FOMC policy meeting and statement.