Global Themes

America’s greenback was little changed as gains against the yen and emerging market currencies offset weakness versus sterling and commodity units from Australia and Canada. The euro also played it broadly flat after a failed attempt overnight to reclaim 3-week highs. Commodity currencies were in vogue thanks mostly to a spike in oil toward $70, the highest since late 2014. Oil has been on a tear on reports that the world’s top exporter, Saudi Arabia, wants to see prices above $80 a barrel. Overall, the U.S. currency kept to a range with downside limited thanks to solid economic fundamentals and upside checked by uncertainty over politics and trade. On today’s docket are U.S. reports on weekly jobless claims, the Philly Fed index and leading indicators.


The euro held near but below 3-week highs as it continued to feel the gravitational pull of dovish inflation data this week that kept the ECB on a cautious path to scaling back stimulus. Any area rate hike appeared on a further 2019 horizon after figures Wednesday showed inflation was unexpectedly revised down to a decidedly benign level of 1.3% from 1.4% - which moved price growth further away from the central bank’s just below 2% goal.


Canada’s dollar firmed above a central-bank-induced tumble to one-week lows. If not for stronger oil near $70, the highest in more than 3 years, the Canadian dollar might be in weaker shape. The Bank of Canada Wednesday left borrowing rates unchanged at 1.25%, as expected, but issued a largely dovish message that suggested a rate hike might materialize later – perhaps the second half of the year – rather than sooner. The bank acknowledged that slower growth over the latter half of 2017 had been more pronounced than expected and it sharply slashed its forecast for first quarter growth to 1.3% from 2.5%.


Sterling firmed above one-week lows but kept to a somewhat lower orbit after disappointing data on the U.K. consumer suggested less scope for the Bank of England to lift interest rates from 0.50%. Retail sales fell by a larger than expected 1.2% in March which came on the heels of data showing the lowest inflation (2.5%) in a year. The market as all but conceded a May rate hike to 0.75% but beyond that skepticism is on the rise about higher rates over the second half of the year.


The Aussie dollar clocked a 5-week high as rallying oil markets overshadowed underwhelming news on Australia’s job market. Australia netted only 4,900 jobs in March – a mere fraction of forecasts of a gain of 21,000. The nation’s unemployment rate steadied at 5.5%. The Aussie firmed above 3-month lows hit last month but its underlying bias remains fragile due to ongoing uncertainty over global trade.


The dollar was broadly steady as higher Treasury yields and positive data offered support and helped to partially allay headwinds related political and trade uncertainties. The yield on the U.S. 10-year note flirted with 2.90%, its highest in weeks, bolstering the buck’s appeal. U.S. fundamentals appeared in relatively robust shape, according to data showing slightly fewer weekly jobless claims (232,000) and a stronger than expected reading of Mid-Atlantic manufacturing, the so-called Philly Fed index. The strength of recent data is consistent with the Fed raising rates in June, a dollar-positive outlook. 

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