Fresh softness in some commodity prices on Monday kept the dollar in demand while investors treaded cautiously ahead of a Monday meeting in Brussels at which Greek officials will plead for further financial assistance. The dollar was ahead of the pack earlier alongside its other safe haven comrades of the Japanese yen and Swiss franc. An unexpectedly sharp fall in the Empire state manufacturing index reminded investors of the impact of rising raw materials.
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U.S. Dollar – The dollar was firm overnight with its index reaching 76.00 for the first time since April 4, although there are questions overhanging the fresh dip in commodity prices as New York trading begins. Global stocks are weak but the U.S. index future has rebounded from its earlier low and it appears as though there could be some bargain hunting after the official open. Subsequently the dollar has come off its best levels of the day and is marginally lower at 75.67. The economic calendar is quiet with two small pieces of the jigsaw puzzle to be released Monday. The Empire state manufacturing index for May fell to its weakest since January as activity dipped from 21.7 to 11.88. An NAHB housing index is also due later.
Euro – Investors still seem unconvinced that the euro is due a rebound anytime soon given the imminent Brussels discussions at which ministers will debate more aid for Greece. Ministers reconvene this afternoon and bets are starting on when and what sort of official and unofficial comments will follow. The investing community agrees on one common facet, which is that there is no good outcome at this stage. Banque de France Governor Christian Noyer said at the weekend that predictions that fiscal tightening would cause European growth to tip over the edge have been proved to be ill-judged and outweighed by the rise of private sector confidence lifting the economy back to a healthy growth rate. Core CPI was confirmed at 1.6% in a final reading released earlier today for April. The headline rate accelerated to 2.8%. The single currency stopped its decline at $1.4048 and has recovered by a full cent against the dollar.
British pound – The pound traded sideways for most of the European session and relied on a Rightmove home prices survey for buoyancy as the morning progressed. The timing of Easter and an overall supply-shortage saw asking prices rise to the highest since 2008. This hardly represents a housing recovery with activity remaining light. The pound advanced against the dollar later in the morning to trade at $1.6200 while it is a little weaker per euro at 87.26 pence. Investors will find better trading conditions later in the week surrounding the release of the May MPC minutes and April inflation data.
Japanese yen – The dollar made the most of risk aversion in the Asian session rising to ¥81.06 before the Japanese unit advanced forcing the dollar lower to ¥80.72. The yen was higher after a core goods inflation index advanced faster than forecast to show prices advanced 2.5% year-on-year. In a separate report machinery orders during March unexpectedly jumped by 2.9% while investors were braced for a slump. The euro also advanced during early New York trading buying ¥114.28.
Aussie dollar – The Aussie has traded in the black against the dollar but currently remains lower after having reached its weakest in four weeks falling to $1.0513 U.S. cents. Data released at the outset of the week once again drew attention to the two-tier nature of Australian growth and the sensitivity to rising interest rates among the consumer sector. The Aussie mining boom continues to shine, while unemployment rose in the states home to Australia’s two largest cities during April. Home lending data declined to its weakest reading in a decade and fell 1.5% during the month, while new motor vehicle sales declined by 3.5% leaving sales lower by 8.4% year-on-year.
Canadian dollar – The loss of conviction investors are currently showing across commodity investments has the greenback fast-making a dash back to parity where it hasn’t traded since the start of February. Despite its admittedly minor yield advantage the Canadian dollar has been a darling among the investment world underpinned by robust global growth. But the reversal in sentiment towards the U.S. dollar despite the near-zero chance of a change in official interest rates along with ongoing commodity weakness are harming the loonie. The Canadian unit slid to $1.0230 ahead of data showing a 1.9% rise in manufacturing sales during March and currently stands at $1.0255 U.S. cents.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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