March 2019

Mar. 15, 2019 (Western Union Business Solutions)  – The U.S. dollar softened anew Friday, something it’s done for the better part of the week. The greenback was mildly lower against the euro, yen and Canadian dollar. Sterling steadied after a Brexit-induced roller coaster week, while the Aussie, kiwi and emerging markets strengthened. While flat Friday, sterling was the week’s star performer after the latest Brexit developments suggested a lower risk of Britain crashing out of the EU without a trade agreement. The U.K., albeit in principle, ruled out a messy, no-deal exit and voted to push back its March 29 departure from the bloc. Sterling’s nearly 2% rise this week was on track for its best performance in almost two months. The buck’s nearly 1% decline this week was on pace for its worst week of the year. Signs of a moderating U.S. economy weighed on the dollar ahead of next week’s all-important Fed meeting.

 

 

Euro creeps higher

 

The euro was little changed Friday but on track to eke out a weekly gain against its U.S. rival. The euro cleared short-term resistance this week when it climbed to one-week highs. However, fundamental forces amid a weak European economy and the ECB postponing rate increases have capped upside for the single currency. Data today confirm an anemic 1% rate of core inflation, a stubbornly low level that keeps policy normalization off the radar.

 

 

Sterling firm after bullish week

 

Sterling was flat after a roller coaster week in which it soared nearly 2% to nine-month peaks. The pound’s performance weekly performance was on track for its best in nearly two months. The pound outperformed after the latest Brexit developments suggested a lower risk of Britain crashing out of the bloc in disorderly fashion. The U.K. voted against a no-deal exit and decided to ask the EU for a later departure from the bloc. Still, the thick fog of uncertainty that Brexit represents hasn’t changed much, a factor that could keep the pound on an unpredictable near-term path.

 

 

Oil weighs on loonie

 

Canada’s dollar tracked oil markets lower Friday. For the week, USDCAD was poised for a decline which allowed the Canadian dollar to rebound from two-month lows. Oil’s push to 2019 highs petered out, with crude down more than a percent and below $58. Key for the loonie next week will be a midweek U.S. central bank decision and late week numbers on Canadian inflation and consumer spending. Further signs of a moderating Canadian economy would bode well for USDCAD.

 

 

Dollar slips, Fed in focus 

 

The dollar index was on pace for its worst week of the year as tepid inflation reinforced the Fed’s steady outlook for monetary policy. Data today on factory growth and the Empire State index also underwhelmed. Consequently, the Fed next week is likely to keep in wait and see mode on interest rates, a cautious stance that’s checked the dollar’s rise. The Fed on March 20 will also issue fresh projections for the economy and interest rates. For the buck to sustain its underlying bullish bias, the Fed would need to keep the door ajar to a rate hike by year-end.

 


USA 

Mar. 11, 2019 (Western Union Business Solutions)  – The greenback tiptoed into the new week as it treaded carefully ahead of important news on the U.S. consumer. The buck was broadly flat against the euro, yen and Canadian dollar. Sterling was on a fragile footing ahead of crucial votes this week in the U.K. Parliament on Brexit. The dollar scaled new highs last week after central banks played down prospects for higher interest rates. Canada’s dollar hit a two-month low while the euro slumped to its weakest since mid-2017. The coming week should shed light on how much dollar strength of late stems from weakness in rival currencies. America’s data calendar will shine a spotlight on the economy-driving consumer with retail sales today and consumer inflation Tuesday. The buck would be vulnerable to further signs of economic fatigue after data last week showed the weakest hiring in more than a year.

 

 

Euro close to 20-month lows

 

A fragile euro was less than a cent away from 20-month lows against its U.S. rival. Germany today released another batch of lackluster data that validated the ECB’s decision last week to postpone higher interest rates and offer more support to the economy. German industrial orders unexpectedly slid while the nation’s trade surplus narrowed, setting the stage for another weak quarter of growth during the January-March period.

 

 

Crucial week for Brexit, sterling

 

Sterling fell to three-week lows overnight on uncertainty over what this week’s crucial votes in Parliament might mean for Brexit. The voting kicks off in Parliament Tuesday when lawmakers will decide on the fate of the prime minister’s Brexit deal with the EU. Failure to pass Mrs. May’s plan, a scenario that appears a near certainty, would trigger another vote Wednesday on whether to pursue another deal or no deal at all. A potential third vote looms Thursday when Parliament could decide whether to delay Brexit beyond the current date of Mar. 29.

 

 

Flat loonie pinned near multimonth bottom

 

Canada’s dollar steadied, albeit near two-month lows, as it found tentative support from last week’s bullish jobs report. Friday data revealed that Canada went on a strong hiring spree for the third time in the last four months. The jobs data suggested a lower risk of the next move from the Bank of Canada being a rate cut from 1.75%. Oil gained 0.5% early Monday to above $56, an increase that also buoyed commodity-influenced currencies.

 

 

U.S. retail sales rise after dreadful December

 

The buck had little reaction to better than expected news on the U.S. consumer. Retail sales topped forecasts with a 0.2% increase in January, compared to forecasts of a flat reading. Core spending also surprised to the upside with a zesty 1.1% increase. The buck’s muted response stems from how poor spending the month before fit with the narrative of the economy losing altitude into the new year,  a scenario that should keep U.S. interest rates grounded over the foreseeable future. Low rates for longer are negative for the buck’s appeal to those seeking higher returns.

 

 

Mar. 7, 2019 (Western Union Business Solutions)  – The euro slipped to three-week lows after the ECB left borrowing rates unchanged and announced a new easing plan to help spur faster bank lending to help resuscitate Europe’s sputtering economy. Starting in September, the ECB will launch a new round of cheap loans to banks and continue the program through March 2021. The ECB also pushed out its forecast for an eventual rate hike from after the summer to after 2019, at the earliest. That means that Mr. Draghi is poised to go his entire presidency without firing a single rate hike. The euro slid on the news and could add to its losses if the market senses the central bank is running low on tools to turn the economy around. Mr. Draghi speaks soon, remarks that will be important for currencies.

 

Brexit uncertainty pressures sterling

 

Sterling favored one-week lows amid a lack of progress on the Brexit front. Britain’s Parliament is due to vote again on Theresa May’s Brexit deal on Mar. 12. Weeks of negotiations with the EU have largely left the prime minister’s divorce deal little changed, suggesting doubts in Parliament passing it. The Brexit impasse suggests that Britain would inevitably be forced to delay its exit from the bloc to beyond Mar. 29, a scenario that would do little to lift the fog of uncertainty.

 

Loonie steadies around 2-month low

 

Canada’s dollar steadied after a central bank-inspired tumble to two-month lows. A subtle but significant shift in the outlook for Canadian interest rates reawakened loonie bears who have largely been in seclusion this year. The Bank of Canada left interest rates unchanged at 1.75% as expected and watered down expectations for a hike anytime soon given the surprising weak shape of the Canadian economy, one that it now expects to moderate further over the first half of the year. Canada’s dollar will look for direction from the job market Friday. Hiring is forecast to stall after robust gains over two of the past three months.

 

Dollar rolls to new highs after Draghi, data

 

The dollar index climbed to three-week highs, getting a double boost from the ECB’s dovish turn and better than expected U.S. jobs data. Weekly jobless claims improved more than expected with a decline to 223,000 in the latest period. The data was consistent with the job market firing on all cylinders ahead of tomorrow’s government employment data. The buck is weathering the Fed’s patient rate stance which is being offset as more and more central banks turn increasingly dovish.

 

Mar. 1, 2019 (Western Union Business Solutions)  – The U.S. dollar made a mixed start to March. On the bright side, the U.S. currency pushed to 10-week highs against the yen and rebounded from seven-month lows against sterling. However, risk-on sentiment amid a global stock rally worked in the favor of the euro and commodity rivals like the loonie, Aussie and kiwi dollars. Rising Treasury yields have pulled the greenback out of its biggest hole in weeks. Evidence of still-solid U.S. growth lifted the yield on the benchmark 10-year bond above 2.70%, accentuating the dollar’s allure in a low rate world. The euro steadied as a mix of good and bad economic news from Europe largely counterbalanced. Sterling was on track for its best week in a month, though a bout of profit-taking keep it below mid-2018 highs. A potential catalyst looms for the greenback today in influential U.S. data on the consumer and inflation.

 

Data leaves euro uninspired

 

A mixed bag of European data offset to leave the euro little changed. Unemployment in the 19-country bloc steadied at 7.8% in January, the lowest in more than a decade. Higher energy lifted overall inflation by a tick to 1.5% in February. But the more reliable and less volatile gauge of core inflation weakened to 1% from 1.1%. Lower underlying inflation will dial up pressure on the ECB to consider offering stronger monetary support to its lackluster economy. The central bank meets next week when it’s expected to leave its main lending rate unchanged at zero. The ECB also will provide fresh economic forecasts. Any downgrade to the growth outlook would raise an already elevated bar for the ECB to raise interest rates later this year, a scenario that could tighten the lid on the euro.

 

Sterling poised for 2nd weekly gain

 

Sterling surrendered part of a rally that hoisted it to July 2018 highs against the greenback as traders took profit on its 2-cent rise over the week which was on pace for its best weekly performance in a month. The latest Brexit developments suggested Britain would avoid a nasty no deal exit later this month. Meanwhile, odds of Britain choosing to delay its Mar. 29 departure increased. As for Britain’s economy, a gauge of factory growth slowed in February, underscoring the urgency for Britain to avert an ugly no deal withdrawal from the EU.

 

Loonie tumbles after dreadful data

 

The loonie entered March like a dove after shockingly weak data kept higher rates off the table and out of sight. Canada’s economy slowed to a 0.4% annual rate in the fourth quarter, which missed forecasts of 1.2% by a longshot. Growth last quarter was the slowest in two years and down sharply from the 2% pace during the third quarter. On a monthly basis, growth contracted in December for a second straight month. The data cemented expectations for the Bank of Canada on Mar. 6 at 10 a.m. ET to leave interest rates unchanged at 1.75%. Moreover, the sharp slowdown could also give rise to talk of the next move in rates being a loonie-negative cut.

 

Steady inflation supports dollar

The dollar kept positive in the wake of mixed data on the U.S. economy. Consumer income and spending both contracted in December. But the good news was on inflation as core prices steadied at 1.9%, keeping in close proximity of the Fed’s 2% bullseye. Today’s data should keep the Fed sidelined over the foreseeable future. Still, stable inflation near the Fed’s goal will keep the door open to higher rates, the chief catalyst behind the dollar’s outperformance. Next week: Nonfarm payrolls.