Without any significant data released either in the UK or the States, the Dollar’s dramatic decline resumed yesterday after what can be considered as an outright rejection of the new lows around the 1.8640 level and the Dollar promptly fell back to close above 1.8800. The recent volatility and lack of appetite for the U.S Dollar has primarily been driven by the Fed’s decision to end it’s current interest rate cycle, which has seen 16-consecutive rate hikes in the past 22-months. However, Bernanke did indicate that the FOMC wouldn’t hesitate in lifting interest rates oncemore, providing the fundamental data released in the States supported the view of rising inflation and a growing economy. Therefore, the Dollar’s volatile reaction to poor U.S data has been increasingly evident as the market’s attention begins to focus on the U.S Trade and Current Account deficits. The market has already factored in a further rise in interest rates over the coming months but the data released has yet to validate this sentiment.
For a second day, there isn’t any significant data released in the UK and we will turn our attention to the CBI Monthly Industrial Trends survey released tomorrow with forecasters anticipating continued improvement in May following a sharp increase in UK Manufacturing Output and Industrial Orders. Coupled with a rebound in Consumer Sentiment and Spending, the market is now anticipating that the Bank of England will need to lift interest rates at some point this year in order to keep inflation around the 2% target, a sentiment echoed in the minutes of the BoE’s recent rate announcement with one policy maker voting for an increase in UK rates for the first time in nine months.
The Euro rose by 0.5% against the Dollar yesterday following the release of the European Trade Balance, which unexpectedly showed a surplus of €300 Million in March despite forecasters predicting that the deficit had increased by €2.5 million following an apparent slow-down in euro-zone exports. There is a plethora of data released this morning, most notably Industrial Orders for the month of March, which is widely anticipated to show an increase of 0.3% and GDP in Germany is expected to show that Europe’s largest economy accelerated by 0.4% in the first quarter.
Data Released 23rd May
GER 07:45 GDP (Q1)
EUR 10:00 Industrial Orders (Mar)
written by Adam Solomon
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- Markets drifted on lack of data yesterday…
- The Dollar declines to new yearly lows despite a plethora of strong U.S data
- The Dollar strengthens as the unemployement rate unexpectedly falls to 4.7% in March
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