The U.S. dollar favored session lows as rising global tensions gnawed at sentiment and kept American Treasury yields anchored at multimonth lows. In a broad decline, the dollar fell this week to February and March lows against the Canadian dollar and a trade-weighted basket of currencies, and to its weakest in five months against the safer yen. Market action today is extremely light with many global hubs off for the Passover and Easter holidays that extend in some places through Monday. Increased saber-rattling between the U.S. and North Korea kept sentiment on edge. With global risks dominating, it’s forced America’s solid fundamentals to the backburner, weighing on the dollar which was also pressured by remarks from President Trump who considers it ‘too strong.’ Wall Street has the day off but not the U.S. economy which releases important data today on retail sales. Forecasts call for the weakest pace of spending in seven months.
The euro enjoyed modest appreciation this week as the dollar’s selloff overshadowed political uncertainty ahead of France’s first round election on April 23. The two candidates with the most votes will face off in a run-off on May 7. Uncertainty over who will ultimately become president and fears it could be someone that favors pulling France out of the EU, like the far-right’s Marine Le Pen, should keep the euro’s short run prospects grounded. Most European markets will be closed for Easter Monday. The bloc on Wednesday (Apr 19) releases a final estimate of inflation, a key driver of ECB policy.
The pound got back in the win column this week as U.K. data offered support, while the dollar fell out of favor for a myriad of factors, including the momentarily blow to sentiment from comments from President Trump. U.K. inflation held above the Bank of England’s 2 percent bull’s eye and wages ticked higher. Still, optimism in the U.K. economy has moderated, a view that could gain traction should an April 21 survey show consumer spending shifted into reverse under the weight of rising prices. London, the FX market’s biggest global hub, will be off for Easter Monday.
Perched near six-week peaks, the loonie was on course to finish the week ahead of the greenback. Firm oil above $53, a less dovish Bank of Canada and a retreating greenback all proved a cocktail of loonie outperformance. Doubts remain in the loonie’s ability to sustain gains for meaningful stretches with markets rife with risk aversion, a boon for safer currencies, and Canadian inflation data on April 21 forecast to show some moderation, which would fit with the BOC’s outlook of moderating price pressures.
Subdued U.S. data Friday on the consumer and inflation kept the dollar’s defensive bias intact. Retail sales fell 0.2 percent in March while the reading for February got downwardly revised to a 0.3 percent decline, the most in about a year. The headline CPI slowed to an annual rate of 2.4 percent from 2.7 percent. The data cemented expectations of slower first quarter growth. Forecasts call for growth to quicken in the second quarter given underlying strength in the economy. The dollar lost only modest ground on the news due to holiday-light markets.
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