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The US currency was also unsettled by a renewed increase in oil and commodity prices. The US growth-orientated data was mixed, but the forward-looking data was marginally positive. Industrial production fell by 0.7% in April after a revised 0.2% increase the previous month and capacity use also declined.
but was again unable to sustain the gains. US consumer prices rose 0.2% in April while the core increase was also slightly below expectations with a 0.1% increase. The monthly price change eased immediate fears over inflation to some extent, but there was still an underlying annual increase of 2.3% which is above the Fed’s comfort zone.
Headline US retail sales fell 0.2% in April, in line with market expectations, while the underlying figure was stronger than expected with a monthly increase of 0.5%. Auto sales dipped sharply, but there were some areas of strength with a recovery in building materials sales.
that the US administration was targeting a stronger dollar and had been instrumental in pushing for a stronger G7 stance on the US currency. The dollar pushed to a high around 1.5370, but was unable to break Euro support levels and weakened steadily back to lows around 1.5570 in New York The dollar was hampered slightly by a rally in oil prices during the day.
and drifted weaker to lows around 1.5490 with the US currency at the weaker end of this range in New York. The US currency had gained support earlier in the week from the expectations of a softening of the ECB stance and the US currency was still suffering from some reassessment of the situation following Thursday’s council meeting.
but then secured a firmer tone during the day.
As expected, the ECB left interest rates on hold at 4.00% following the latest council meeting and the main focus was on the statement following the announcement. ECB Chairman Trichet maintained a generally tough stance on inflation in his testimony. Trichet also pointed to downside growth risks and, despite the inflation rhetoric, the overall impression was that the bank was in a holding pattern to await further developments.
In this context, the Euro-zone data during the day was negative for the currency. Retail sales fell by 0.4% in March which triggered a record annual decline of 1.6%. In addition, German factory orders fell by 0.6% for the second successive month to give an annual decline of 5.0%. Evidence of weakness in the retail and industrial sector will continue to undermine confidence in the economy and currency.
and gains to 1.5450 on Tuesday were quickly reversed with the US currency weakening to lows near 1.56. The US currency was unsettled in part by a renewed increase in commodity prices as crude reach a fresh record high around US$122 per barrel. Following the PMI services-sector index increase to 52.0 for April from 49.6, reported on Monday, there were no significant data releases on Tuesday.
and then strengthened sharply over the remainder of the day with liquidity reduced by European holidays. The dollar broke Euro support levels near 1.55 and pushed to highs beyond 1.5430 after the US data releases. There was a further unwinding of short dollar positions and long commodity positions and these trends tended to reinforce each other over the day.
and then strengthened sharply over the remainder of the day with liquidity reduced by European holidays. The dollar broke Euro support levels near 1.55 and pushed to highs beyond 1.5430 after the US data releases. There was a further unwinding of short dollar positions and long commodity positions and these trends tended to reinforce each other over the day.
after the slightly firmer than expected US data before drifting back to 1.5570 ahead of the FOMC decision The advance report for first-quarter GDP recorded growth at a 0.6% annualised rate compared with an expected 0.2%. There was a further sharp decline in housing investment and business spending also fell. Consumer spending growth was weak at 1.0% while there was a boost from exports.
The Euro recovered ground after the US data releases, but was unable to hold above the 1.56 level and drifted weaker later in New York.
The US data remained generally weak, but failed to have a major impact. The Case-Shiller 20-city house-price index recorded a 12.7% decline in prices in the year to February from a 10.7% drop previously, maintaining fears over the housing sector.
The dollar weakened to lows around 1.5690 against the Euro in European trading before gaining strongly to 1.5600 and settling around 1.5640.
There has been further speculation that the Federal Reserve will switch to a neutral policy bias following the FOMC interest rate decision on Wednesday. Futures markets have also increased the possibility that rates will be left unchanged this week to above 15% with the majority still expecting a 0.25% rate cut to 2.00%.
before being subjected to a corrective reversal following strong gains over the previous 24-hour period.
The revised University of Michigan consumer confidence index edged lower to 62.5 for April from a provisional 63.2 which will maintain fears over the outlook for consumer spending, although the short-term impact should be measured. An important element in the survey was an increase in the inflation expectations component to 4.8% from 4.3% the previous month.
The German IFO index weakened to 102.4 in April from 104.8 the previous month which was significantly below expectations. The sharply monthly downturn will increase fears over a significant slowdown in the German and wider Euro-zone economy, especially as there was also a sharp downturn in the important Belgian industrial confidence indicator released on Wednesday.
but was unable to make a fresh challenge on resistance above this level.
The Euro-zone data was mixed with a drop in the PMI index for the manufacturing sector offset by a recovery in the services data. Confidence indicators will be watched closely in the short term and the influential IFO report will be released on Thursday.
The dollar was also again unsettled by the strength of oil prices.
US existing home sales edged lower to an annual rate of 4.93mn for March from 5.03mn the previous month. There was an increase in inventories while prices fell over the year.
Despite a small monthly increase, there was a decline in recorded house prices over the year.
The US currency was again being hampered by the strength of oil prices which temporarily traded at fresh record highs before edging lower in US trading. The Bank of America quarterly results were weaker than expected and this also dampened the mood of cautious optimism that had built up over the second half of last week.
The Euro dipped to lows around 1.5710 before pushing back to 1.58 later in New York.
There were no significant data releases during the day with the main focus on asset markets. The results from Citigroup contained a lower than expected figure for debt write-downs and this boosted confidence that Wall Street banks could manage the credit and economic risks.
but was unable to sustain the advance and was generally weaker in New York trading.
Euro-group head Juncker stated that the markets had not understood the G7 message on exchange rates. These comments temporarily pushed the dollar stronger on renewed speculation that there could be a decisive move to intervene and support the US currency.
The dollar weakened to lows around 1.5980 before stabilising around 1.5950.
The US housing data was weaker than expected with starts falling to an annual rate of 0.95mn in March from 1.08mn the previous month. Permits were also weak which will maintain fears over a protracted downturn in the housing sector.
challenging levels near 1.5880, but the currency was on weaker ground over the remainder of the day as the economic data was generally dollar supportive. The New York manufacturing index recovered strongly to a figure of +0.6 in April from -22.2 the previous month. Although the data series is very erratic on a monthly view, the sharp improvement will boost confidence that rising US exports will provide a cushion to the manufacturing economy.
The statement referred to the fact that members were concerned by recent exchange rate movements as they had potentially negative implications for economic and financial stability. The dollar was not mentioned specifically, but this was the clear target for the statement. In response, the dollar strengthened to highs near 1.5680 in early Asian trading on Monday as long Euro positions were scaled back.
The provisional University of Michigan consumer confidence index fell further to 63.5 in April from 69.5 the previous month, reinforcing the deterioration in confidence seen over the past few months. The data will maintain fears over consumer spending ahead of the US retail sales report on Monday. US economic fears were also fuelled by weaker than expected earnings from General Electric.
As expected, the ECB left interest rates at 4.00% following the latest council meeting. In the press conference following the decision, ECB President Trichet again pointed to short-term inflation pressures and re-iterated its determination to avoid secondary inflationary pressures. The comments were broadly in line with recent remarks made by ECB officials.
and weakened sharply to lows beyond 1.5865 before stabilising in US trade.
There were no major US developments over the day with the US currency unsettled by a lack of confidence in the economy as the IMF forecast a mild recession. The dip on Wall Street and high oil prices also undermined confidence in the US dollar.
but strengthened back to around 1.57 at the open of New York markets. Thereafter, neither currency was able to secure a decisive advantage and the dollar was able to resist losses despite a weaker initial bias after the US events. The US economic data offered no support to the dollar with pending home sales falling by a further 1.9% to a record low in March, although there will be some optimism that sales rose in the west after a sharp downturn over the past few months. A measure of consumer’s economic confidence also continued to deteriorate in the latest survey.
but was unable to sustain the gains and weakened back to test support levels around 1.5730 before consolidating close to 1.57.
There were no significant data releases with markets still considering the implications of Friday’s employment report. Despite the weak headline data, there is less confidence that the Federal Reserve will look to cut interest rates aggressively further in the short term with markets also looking at inflation pressures.
with lows around 1.5740 as sentiment was damaged by the failure to hold gains on Thursday.
US non-farm payrolls fell by 80,000 in March which was the biggest fall for close to 5 years while the figures for January and February were both revised lower to show a net loss of over 160,000 jobs for the first quarter.
The Euro-zone PMI index for the services sector dipped to 51.6 for March from a provisional 51.7 with the Spanish index at a record low close to 40.0. There was also a 0.5% monthly drop in Euro-zone retail sales for February which will maintain expectations that the economy is slowing sharply. There will be increased pressure for a policy shift by the ECB if growth conditions continue to deteriorate.
The ADP employment report was stronger than expected with an 8,000 increase in employment for March following a revised 18,000 decline for the previous month. The data is still weak as it would suggest payroll growth of around 30,000, but there will again be some relief that the figure was better than expected and stronger than in February.
and dipped sharply to near 1.56 in early US trading.
The US PMI index for the manufacturing sector rose slightly to 48.6 in March from 48.3 the previous month. The report still indicates a contraction and there will be some concerns over a further drop in the orders component, but there will be some relief that the expected deterioration was averted.
The US currency weakened sharply to near the all-time low of 1.5905 before rallying equally sharply to 1.5790 in choppy trading surrounding the end of the first quarter. The US Chicago PMI index rose to 48.2 in March from 44.5 the previous month which will offer some hope for the manufacturing sector and the national PMI index will be very important for sentiment on Tuesday.
with support close to the 1.5840 level against the Euro while the US currency was again blocked below 1.5750. The final University of Michigan consumer confidence index for March dipped to a 15-year low of 69.5 from a provisional reading of 70.0, maintaining the recent pattern of weak consumer confidence, while the latest consumer spending data was subdued.
The US currency was unable to sustain the gains and weakened back to consolidate around the 1.5780 level in cautious trading. The final fourth-quarter US GDP estimate was confirmed at 0.6% which will provide some minor relief given the possibility of a downgrade to below zero. Initial jobless claims also fell slightly to 366,000 from 375,000 the previous week which continues to suggests a softer labour market, but no major further deterioration at this stage.
It was then subjected to renewed selling and weakened sharply to lows near 1.5840 in New York trading. Sentiment towards the US economy and currency remained depressed while the Euro developments were more positive. The US new home sales data followed a similar pattern to the existing homes data released on Monday. Sales were at a 13-year low, but were higher than expected with an upward revision to January’s data.
and it was unable to secure any significant recovery. Renewed fears over the economy pushed the currency to lows around 1.5620 level in New York trading.US consumer confidence weakened further in March to 64.5 from a revised 76.5 the previous month. This was the weakest headline reading for five years while the expectations component fell even further to the lowest level for 35 years.
The dollar weakened back to beyond 1.54 in New York in a correction from rapid gains over the past few days. European markets were still closed on Monday which stifled activity. Short-term US yields rose strongly during the day which provided some additional backing to the US dollar.
The dollar pushed to highs just beyond the 1.54 level before correcting weaker to around 1.5440 later in US trading. The US economic data was mixed on Thursday, but still had a weak bias. Initial jobless claims increased to 378,000 in the latest week from a revised 356,000 previously which suggest that the labour market is deteriorating slightly further. The Philadelphia Fed index recovered to -17 in March from -24 previously and there was an important improvement in the six-month business outlook index. Despite the headline contraction this improvement will raise some expectations that the economy can recover later in 2008.
The dollar weakened in European trading on Wednesday, but resisted a decline through the 1.58 level and pushed to re-challenge key Euro support levels around 1.5610. The dollar temporarily broke through this resistance band before settling around 1.5620. The US authorities are continuing with measures to boost market liquidity. The regulators have raised the capital limits on mortgage agencies Freddie Mac and Fannie Mae which will allow them to take additional mortgages on to their books and effectively increase liquidity in the sector as a whole.
The dollar weakened to lows around 1.5830 against the Euro on Tuesday before consolidating just stronger than 1.58 ahead of the FOMC interest rate decision. The dollar drew initial support from better than expected earnings reports from Lehman and Goldman Sachs which eased financial-market stresses.
The Federal Reserve cut the Fed Funds rate by a further 0.75% to 2.25% following the meeting. There was a 8-2 vote in favour of the decision with Plosser and Fisher dissenting and calling a smaller rate cut.
The dollar tested levels near 1.5530 ahead of the New York opening on Friday. Volatility then spiked higher with new record dollar lows around 1.5685 after the Bear Sterns news before a recovery to 1.5610 in very choppy trading. The dollar was supported by some rumours that the central banks had been checking prices.
US consumer prices were unchanged in February while core prices were also static over the month compared with expectations of a 0.2% monthly increase with an annual 2.3% increase. The moderate data will increase speculation that the Federal Reserve will find it easier to justify a large interest rate cut at the forthcoming FOMC meeting.
The dollar found support weaker than 1.54 against the Euro on Monday and strengthened to test levels around 1.5315, but failed to extend the gains and consolidated around 1.5350. There were no significant data releases and overall confidence in the dollar remained weak with further strong expectations of an aggressive interest rate cut this month. There was also further speculation that the Fed would sanction an emergency rate cut ahead of next week’s planned meeting.
New US jobless claims fell to 351,000 in the latest week from 375,000 previously, but the impact was offset by a further increase in continuing claims. Markets will inevitably be nervous ahead of the crucial Friday payroll report. Another monthly decline in employment, allied with a further increase in unemployment, would further undermine confidence in the economy while a substantial increase would provide some immediate relief.
The composite PMI index rose to 49.3 in February from 44.6 previously. Although the index remained below the 50.0 expansion threshold, there will be some relief that there was a monthly recovery.
The US currency found support close to the 1.5250 level against the Euro, but was unable to make headway much beyond 1.5180.In comments on Tuesday, Fed officials referred to inflation risks, but the overall impression given was still that supporting the economy would have to take priority in the short term.
The PMI index for the manufacturing sector fell to 48.3 for February from 50.7 in January. The index signals contraction in the industrial sector, but there will be some relief over the headline data given that markets were prepared for an even weaker reading while the overall reading is consistent with weak GDP growth rather than contraction.
but was unable to make strong headway as consolidation dominated following the sharp losses this week. There was also caution ahead of a series of key events next week.Global financial risk was generally higher during the day with fears over further debt write-downs.
The revised US GDP growth estimate for the fourth quarter was held at 0.6% compared with expectations of a small upgrade while the inflation estimate edged higher which reinforced fears over stagflation.
The US currency weakened to record lows near 1.5150 before a slight correction. The US economic data flow remained weak with durable goods orders falling 5.3% in January after a 4.4% increase the previous month.
The US currency was unable to hold the gains and weakened persistently during the day. Selling accelerated once European markets closed with lows around 1.4980 which pushed the currency to fresh record lows against the Euro.
The dollar weakened back to around 1.4825 with markets struggling to find direction. Markets continued to monitor the developments in the financial sector and especially the news surrounding bond insurer Ambac. Agreement on a support package would provide some relief over the US financial sector as it would strengthen the case for ratings on the insurers to be maintained.
There were no significant data releases and dollar confidence remained extremely fragile following the negative data releases seen on Thursday. There were also reports of increased credit card problems which undermined sentiment.
The US growth indicators were significantly weaker than expected with the New York manufacturing index falling sharply to -11.7 in February from 9.0 the previous month which follows the recent pattern of particularly weak survey evidence from the manufacturing sector.
Consolidation was a dominant theme on Friday following the substantial Euro losses
seen over the previous few days and especially on Thursday. The Euro found support close to 1.4450 against the dollar, but was struggling to break back above the 1.4520 resistance level. Sentiment was still being undermined by speculation that the ECB will cut interest rates during the second quarter.
At the latest council meeting the ECB held interest rates steady at 4.00%. In the press conference following the meeting, ECB President Trichet still voiced serious concern over inflation trends. The inflation risks were, however, also described as more short term in nature than in previous meetings while Trichet stated that there were important downside risks to the economy.
The dollar probed levels below 1.46 against the Euro in early Europe on Wednedsay,
but was unable to sustain the gains and weakened back to trade within a 1.46-1.4650 range. The dollar was over-bought after the strong gains seen over the previous 24 hours and this made it more difficult to break important resistance levels below 1.46.
The German deputy Finance Minster warned that the Euro should not take all the burden of currency adjustment and protests against Euro strength will intensify if economic fears increase.
There was a slight recovery in risk appetite which curbed defensive dollar demand, but this was offset by optimism over potential merger-related flows into US markets.
The dollar drifted weaker at close to 1.49 against the Euro ahead of Friday's monthly payroll report.
The dollar weakened immediately after the release, but the Euro was gain unable to hold above the 1.49 level and weakened back to 1.48 later in New York as long positions were scaled back. The dollar gained some support from Microsoft’s bid for Yahoo which boosted confidence over potential US inflows.
The dollar was again unable to break back through the 1.4750 level against the Euro
on Thursday while the Euro was again unable to hold above this level. The US currency strengthened to highs around 1.48 before consolidating around 1.4840. The Euro weakened slightly as risk aversion increased, but the dollar was still struggling to secure significant buying support as sentiment remained weak.
