The US dollar continued its fall as risk appetite returned to the market with the hope that the worst of the global economic crisis is behind us. The positive outlook came from yesterday’s US jobless benefits release, where benefits fell for the first time since January. A separate report also indicated that US manufacturing contracted, but much less than market expectations.
The euro market will look towards another round of close to $104 billion in US Treasury auctions, as well as, the Fed’s two-day monetary policy meeting which gets underway on Tuesday. Look for the dollar to stay within recent ranges ahead of the data next week.
The strengthened modestly against the dollar as European shares pushed higher, but still struggled to break above the key psychological level of $1.40.
Look for the euro to hold close to familiar ranges on the heels of the ECB announcing the possibility that European banks may face another $283 billion in losses by the end of next year.
The British pound pushed higher despite the release of weak UK retail sales data and after minutes from BOE’s last policy meeting confirmed a unanimous vote to keep rates on hold at 0.5 percent. Look for the pound to hold on to its recent gains on the heels of a batch of firm economic data released last week.
The Japanese yen weakened against its US counterpart, but seems to be capping current losses. Department store sales figures released, falling 12.3 percent year over year is painting a bleak consumer sentiment outlook. Look for USD/JPY to hold close to its 50 day moving average near 97.20.
The Canadian dollar pared gains against the greenback after government data showed retail sales falling 0.8 percent in April. The loonie did mange to hold on to its recent levels as oil held close to $72 a barrel. Look for the loonie to trade near current levels ahead of next week’s Federal Reserve policy meeting.
The Australian dollar gained across the board as signs the global recovery is on the horizon. In other news, Australia's government is set to sell about $60 billion worth of debt this year to raise funds to pay for its stimulus plan, however, with a spike in local yields, speculation is fueling that interest rates could rise by year-end.
The New Zealand dollar held steady close to a one-week high supported by appetite for riskier assets. Investors will look towards New Zealand’s first-quarter gross domestic product, current account and consumer sentiment figures next week for further direction into the kiwi.
The Mexican peso strengthened as investors moved back into riskier assets ahead of an expected interest rate cut to boost the Mexican economy. Look for the peso to hold close to familiar ranges as the market has already priced in a 50 basis-point cut to 4.75 percent.
