Dark clouds settled over the US dollar

Apr 17 2015, 6:57 am
Dark clouds settled over the US dollar

The American macroeconomic data are giving investors more reasons to sell the us dollar. On Wednesday, after the Empire State Manufacturing Index decreased to -1.2 points, the Capacity Utilization Rate was reported down to 78.4%, and the Industrial Production also declined, being reported at -0.6%, yesterday another set of data disappointed the market. The Building Permits fall to 1.04 million, Unemployment Claims rose to 294k, Housing Starts also fell to 0.93 million and only the Philly Fed Manufacturing Index was reported up to 7.5 points, sweetening the situation.

The American economy is indeed passing through a difficult time, a fact that was also admitted by Atlanta Federal Reserve Bank president Dennis Lockhart, a voting member of the Fed’s rate-setting committee this year. Comments are similar to those of Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren, who didn’t let go of their dovish tone.

Meanwhile, the American dollar depreciated as recently the EURUSD developed an ascending channel, climbing the quote to 1.0817. Currencies as the Australian and New Zeeland dollar, the Pound sterling, the Japanese yen and the Swiss franc are favored at the expense of the dollar. Still, the fact that the price of gold didn’t react much increases chance to see these movements being corrected, probably by the end of the month when the FOMC Statement will be released.

Concerning Greece, Prime Minister Alexis Tsipras continues to display an optimistic image in the press, while Financial Times wrote about Athens that requested a delay in its loan repayments to the IMF. What does this request mean? Well, it is translated into a step closer to bankruptcy. The euro doesn’t seem affected, for now, as it is enjoying the effect of Mario Draghi’s comments.

The ECB’s president gave assurances that the QE program will be continued even after September 2016 if the situation demands it.

Speaking about the oil market, interesting evolutions have been observed in this area too. At the beginning of the week the EIA warned of the decrease in supply from the United States this year. A pleasant coincidence came from the fact that this week the oil inventories were reported down to 1.3 million barrels. All these news correlated with the conflicts in the Arab States lead to a wave of appreciation of oil quotations. In the short term, market participants may watch out for corrections as the recent ascending channel is still fragile in the context of a global oversupply and the demand being strangulated by the economic slowdown of some of the most important regions.

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