The US dollar failed to establish a clear technical direction in recent trading, as major currency pairs were driven by currency-specific events. The dollar lost ground to the Japanese yen but packed in gains against the Australian dollar, British pound, and euro. Meanwhile it consolidated to the Canadian dollar, New Zealand dollar, and Swiss franc. The lack of top-tier data from the US economy and uneasiness in the global markets may have contributed to the dollar’s mixed performance.
In the euro zone, data came in weaker than expected as Germany showed a smaller trade balance compared to analysts’ estimates and the previous month’s reading. The pound suffered a sharp selloff and broke down from its consolidation to the dollar when the BOE inflation hearings turned out to be surprisingly dovish. BOE Governor Carney reiterated that the UK central bank isn’t looking to hike interest rates or tighten monetary policy anytime soon, as there is a significant spare capacity in the economy. He added that inflation and employment have a lot of room to improve and that these could benefit from an extended period of low interest rates.
The pound was pushed lower when BOE Deputy Governor Bean mentioned that the currency’s recent rallies might harm exports and overall economic growth. After all, the British currency has appreciated by roughly 10% in the past 12 months, spurred mostly by rate hike expectations. He added that further gains in the sterling could delay an actual rate hike.
Asian Fundamental Outlook
As for the franc, the lack of data from Switzerland kept it moving sideways to the dollar, forming a doji candlestick on the daily time frame. In Australia, data has been mostly weaker than expected. The NAB business confidence reading slipped from 9 to 7 while the Westpac consumer sentiment report indicated a 0.7% decline, suggesting that both businesses and consumers are less optimistic recently. Earlier today, the housing loans report printed a flat reading and showed a downgrade in the previous month’s figure.
The New Zealand dollar, on the other hand, is enjoying some support from rate hike expectations in the upcoming RBNZ statement. Recall that New Zealand PM Key said that the central bank should return rates to normal levels soon, and they might do so this week.
Over in Japan, the BOJ statement triggered some support for the yen as the central bank refrained from easing further and decided to keep its growth and inflation forecasts unchanged.
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