The story for most of this week was one of the dollar’s weakness. After the soft jobs data last week, US data continued to disappoint throughout last week. It started with US retail sales which printed weaker than expected.
Purchases in March rose 0.9% against expectations for 1.1%, while core sales increased by 0.4% vs. expectations for 0.7%. The latest World Economic Outlook report published by the IMF on the same day pointed out that global growth prospects were uneven.
They also lowered growth forecasts for the US this year and next to 3.1% against previous forecasts of 3.3%. Empire State manufacturing, capacity utilization and industrial production releases all fell short of market expectations the next day and the building permits, housing starts and unemployment claims feel short the next.
By Alex Edwards at UKForex, an international money transfer service
There were also quite a few Fed members on the wires towards the end of the week. Vice chair Stanley Fischer said that lift-off would probably happen in 2015, but didn’t specify any particular month. In that respect a June rate hike is looking less and less likely, especially as US data continues to disappoint. Fischer also said yesterday that he didn’t see inflation rising beyond 2% for at least two years which further undermined the greenback.
GBP/USD pushed back through 1.50 on Friday as a result and EUR/USD broke 1.08. Wednesday’s ECB monetary policy statement didn’t really deliver too many surprises. There was no change in policy with the headline rate remaining at 0.05%. Mario Draghi didn’t say much we don’t already know during the press conference either, as he re-affirmed the QE programme will continue until the end of September 2016 and “we see a sustained adjustment in the path of inflation.”
The press conference got off to a lively start as a 21 year old German protester called Josephine Witt stormed the stage, showering Draghi in confetti and unveiling a t-shirt with a slogan berating the central bank. She was promptly lead away, but the incident will have raised security concerns at the bank’s Frankfurt head-quarters. There were the usual concerns over Greece, which saw the euro drop slightly against the pound – Standard and Poor’s downgraded Greece’s credit rating to junk status.
It will be interesting to see this week if the dollar sell off continues, although given the lack of any important top tier from the States this week, it might be an opportunity for traders to square up their short USD positions. Durable goods orders are due later in the week but that’s about it in terms of high impact figures.
Closer to home we have the BoE MPC minutes. Last time around the votes were unanimous to leave rates on hold and we’d expect it to be the same this time, especially so as consumer prices continue to be pressured lower. From the eurozone, German ZEW is due for release but the overriding issue will be the Greek saga. With the dollar trending lower, should these concerns deepen we might see GBP/EUR pop back through 1.40.
In our latest podcast, we talk about The Confetti Lady that moved Draghi but not Markets
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