Positive US Data Not Helping Dollar Sentiment Much

Tuesday’s economic releases from the US are generally in the US’s favor. The NY Fed Empire State manufacturing survey came out better than expected: The general business conditions index rose to 0.63 in April from -22.23 the prior month, which was a record low, and better than the 16.8 reading expected. The new orders index improved to 0.06 from March’s -4.7. The figures indicate a move back into the positive territory and an improvement in the US manufacturing sector. Meanwhile, net foreign acquisition of long-maturity US securities, as seen in Tuesday’s TICs data, rose in February to $60.1 billion from $42.2 billion in the previous month, enough to erase the trade deficit for February. This is seen as a positive sign because it shows foreign investors are cultivating an appetite for US securities despite the credit and housing slowdown. Another report which was released Tuesday was the US producer price index which came out firmer than expected. The headline index increased 1.1% (0.6% expected) and core prices rose by 0.2%, in line with market’s expectations.

German Sentiment Down
German ZEW fell further to -40.7 from -32.0 in March, worse than an average forecast of -29.5, on bearish sentiment due to the new record highs of the Euro and oil price.

UK Sentiment

According to the RICS index, UK housing market sentiment fell to the lowest since its monthly survey started in 1978. Things are also not looking good on the retail side: UK retail sales chalked up their largest year-on-year fall for almost three years in March, with sales of clothing and footwear the weakest in eight years. GBP/USD fell to a low of 1.9620 today.

Forex Trading

The US dollar is only slightly supported on Tuesday from the better-than-forecast economic data, gaining just slightly versus the Euro and yen. Threatening inflation numbers may not give the Fed much elbow room to cut rates aggressively, but we’ll have to wait till Wednesday’s CPI for a better view of inflation. EUR/USD is hovering around 1.5800. Its upside hurdle still lies around 1.5920. USD/CHF’s resistance is around 1.0100.

Wednesday:

UK Claimant count 0830 GMT

Eurozone CPI 0900 GMT

US MBA mortgage applications 1100 GMT

US CPI, housing starts 1230 GMT

US industrial production 1315 GMT

Fed’s Yellen speaks on US outlook 1545 GMT

US Fed’s Beige Book 1800 GMT

Posted in Categories: Economy, Forex.

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