The US Dollar gained against most of its counterparts during today’s trading day thanks to much better than anticipated retail figures, highlighted a confidence in consumer spending.The figures are boosted by the Easter period but provide fresh hopes for a US Interest rate hike in the coming months.
There are a number of other factors that have helped the US Dollar in recent weeks. Oil prices have seen some sharp rises since the beginning of the year, and are likely to improve as we enter the second half of the year.
Despite some small losses in the last couple of days, the Canadian wildfires and Libyan oil disputes have increased demand elsewhere, and now Nigeria oil outages have dominated the news.
Sterling loses ground against the Dollar
Sterling lost 0.5% against the Dollar off the back of today’s retail figures, Mark Carney’s warning over the impact of a ‘Brexit’ on the UK economy provided gains for Sterling yesterday, installing confidence for a ‘stay’ vote. EU referendum polls show almost a 50:50 split, Carney has warned that an out vote would lead to an Interest rate cut as the country would fall into recession.
Next Tuesday the UK Consumer price index for April will be released, followed by US CPI figures, it will be interesting to see which way the currency pair will swing, the likelihood given the recent economic slowdown is that the UK will be on the weaker end of the scale.
In the event US CPI figures come in stronger than expected, I anticipate that the odds of a FED hike will increase significantly, this is also contingent on global economic factors, which are mixed at present.
Mixed economic data for the Euro
The Euro saw mixed economic releases today but Germany once again took the lead. German GDP showed impressive growth for Q1 and YOY despite the Eurozone falling back into deflation. Mario Draghi’s QE program is yet to show progress but with the likes of Greece dragging down the economy, it’s difficult to determine the validity of this argument.
The Euro has lost a cent against the Greenback today off the back of poor GDP figures, next week is the ECB’s Monetary policy followed by Euro CPI data. If Draghi projects a hawkish tone and CPI figures come in worse than anticipated, I anticipate further weakness for the Euro.