Apparently, the divergence between the American dollar and the euro makes its presence felt in the latest evolution of the quotations. Expectations for an interest rate hike in the US shifted towards September, while the Import Price Index (-0.3%) showed the effects of the appreciation of the dollar. On the other hand, Richmond Fed’s Lacker reminded market participants on Friday that he still sees a strong case for the Fed to begin raising short-term interest rates this summer.
In Europe, the euro zone officials are trying to solve the Hellenic problem. On Thursday, Athens received another 6 days term to present an economic reform plan before euro zone finance ministers meet on April 24 to decide whether to unlock emergency funding to keep Greece afloat.
EURUSD resumed the descending trend, currently making a correction in the 1.0600 region, close to the local low at 1.0460. On the other side, the German DAX is making new higher highs, pulling up the whole European capital market. Broadly, the markets are advancing as recently new companies mergers were announced, the drop in the Hellenic yields has increased the bonds quotations and not to forget about the flood of money caused by the QE program.
The bearish tendency seems to gain momentum in the foreign exchange market. The main driver for this movement is the American dollar, while the other currencies are weakened by the contracting economies.
The Canadian dollar is still losing ground because of the descending price of oil, with a falling Ivy PMI and Building Permits. The good labor market data is not convincing the market participants, which seem determined to continue to hold the bearish positions on the loonie.
The New Zealand and especially the Australian dollar are being affected by the dovish monetary policies and also by the disappointing data on China, where inflation seems to stagnate, while the Trade Balance turned out to be very disappointing (3.08B vs expected 45.35B). The Australian dollar has an extra weight to bear, which is the possible interest rate cut on May. Both the AUDUSD and NZDUSD currency pairs are in a corrective phase, which sooner or later, may prove to be temporary.
The pound is overwhelmed by the upcoming elections and together with the disappointing economic data ( Trade Balance -10.3 billion, Construction Output -0.9%, Industrial Production 0.1%) is pushed down to its counterparties. Technically speaking, GBPUSD has recently broken the lateral movement (1.5000 – 1.4635), possibly signaling the pressure on new lower lows.
