Dollar remains sturdy despite swathe of disappointing US economic figures
17/May/2013 • Currency Updates•
GBP had a quiet day yesterday with no relative influential data. Further dust has been kicked up with regards to the UK’s possible exit from the eurozone. Lawmakers from the Conservative Party voted against David Cameron’s legislative program over his policy towards the rest of Europe. A total of 133 parliament members, 116 of them Conservative, voted to show discontent that last week’s Queen Speech did not include a provision for referendum on continued EU membership.
With the uncertainty between the UK and the eurozone (UK’s largest trading partner), sterling’s outlook is set to become gloomy and uncertain. There is also a possible expectation that the BoE will resume its assets purchase programme once Governor Mark Carney sets his robust views.
George Osborne has run into trouble in attempts to slash 11.5bn off public spending as ministers only identified 2.5bn in cuts to their budget. If cuts are not achieved, the UK will find other austerity measures difficult to fulfil, creating increased pressure on political figures and the BoE.
Once again, it is set to be a quiet day for GBP with no data out from the UK.
Yesterday saw the greatest trade surplus in eurozone history being recorded, largely driven by dramatic falls in imports in the wake of both France and Netherlands returning to recession this week. This figure was best illustrated by the Italian trade balance being nearly double the anticipated amount.
The enormous €18.7bn surplus was led almost exclusively by domestic demand for foreign goods, with imports dropping by 10 per cent on the year along with exports idling. Though a minor rise in surplus to €13bn was expected, the markets did not foresee the extent to which they actually increased.
Yesterday saw the announcement of the European consumer price index, which showed a fall to a 38-month low of 1.2 per cent.
There was a significant difference in inflation rates across the eurozone yesterday. However, Greece and Lativa showed overall deflation with prices rising in the Netherlands by 2.8 per cent.
A barrage of worse-than-expected economic data from the States saw the dollar decline against most of its major counterparts on Thursday, as US housing starts fell at a faster-than-anticipated rate in April, and initial jobless claims surged past forecasts. Furthermore, the Philadelphia Fed manufacturing index unexpectedly dropped into negative territory, adding to downwards pressure on the US dollar. Also, the US consumer price index (CPI) eased to an annual rate of 1.1% in April, from 1.5% the month before, under the 1.3% forecast, resulting in the dollar Index falling 0.11% to to 83.74 after five days of gains. It was down as much as 0.5% earlier in the day.
However, appetite for the greenback soon returned on Friday morning after a regional Federal Reserve chief said the U.S. central bank could begin easing up on stimulus this summer. As a result, it approached a 10-month high against a basket of currencies , with the Dollar Index gaining 0.4 percent.