Dollar Weakens, Downside Risks Spotted on Euro
The United States (U.S) dollar was weaker against its major trading partners early Wednesday, ahead of the release of March’s existing-home sales data and the Federal Reserve’s Beige Book summary of economic conditions.
In a note, Morgan Stanley said it continued to see risks skewed to the downside for EUR/USD given increasing probabilities of growth divergence between the Eurozone and the United States and continued geopolitical and electoral uncertainty in France at next Sunday’s presidential election.
Longer-term, continued monetary normalization and supranational fiscal integration could prove EUR-positive catalysts, though growth divergence was more likely to weigh on EUR/USD in the short term before these themes potentially emerged into 2023, according to the bank.
In the United States, the Mortgage Bankers’ Association reported earlier Wednesday that mortgage applications declined further in the most recent week due to another surge in interest rates to the highest point since 2010.
The week’s data highlights include weekly initial jobless claims on Thursday and the flash S&P Global PMI estimates for April on Friday.
A quick summary of foreign exchange activity heading into Wednesday shows that GBP-USD ticked up to 1.3058 from 1.3001 at the Tuesday US close and 1.3031 a day earlier.
UK vehicle registrations fell sharply year-over-year in March according to data released earlier on Wednesday. Retail sales scheduled for release on Friday are the highlight of the UK data calendar this week. The Bank of England is expected to raise interest rates further at its May meeting.
EUR-USD rose to 1.0845 from 1.0789 at the Tuesday US close and 1.0787 a day earlier. EU industrial production rebounded in February after a decline in January, data released earlier Wednesday showed.
March car registrations declined on an annual basis in Italy, Germany, France, and Italy. EU consumer confidence will be released on Thursday followed by manufacturing and services PMI on Friday. READ: U.S Dollar Weakens Against Major Trading Partners
USD-CAD fell to 1.2547 from 1.2622 at the Tuesday US close and 1.261 a day earlier. Canadian CPI for March is scheduled to be released and is expected to show an acceleration in the year-over-year rate for the headline, but a slower pace for core prices.
Canadian retail sales are scheduled to be released on Friday. Following the 50-basis point rate increase last week, markets expect the Bank of Canada to tighten further, possibly by another 50-basis points, at its next meeting in early-June.
USD-JPY fell to 127.8542 from 128.8988 at the Tuesday US close and 128.3267 at the same point a day ago, reversing the upward trend seen over the last few weeks on profit-taking, but the level of the pair remains remarkably high.
Japanese trade data released overnight showed a wider trade gap in March, but the focus is on Friday’s release of consumer inflation and manufacturing PMI. The Bank of Japan meets on April 27-28 and is expected to maintain its stance on low-interest rates. #Dollar Weakens, Downside Risks Spotted on Euro
