Dollar Tackles Four-Month Highs ahead of Data


The Dollar recovered from Friday’s pullback ahead of major economic data. The dollar index, DXY, which measures the greenback against six major currencies rose to near four-month highs. The dollar gained two percent in April, to post its biggest monthly gain since November 2016. In terms of data, the core PCE Price index rose 1.9% in March up from 1.6% in February. As for today, we await the ISM manufacturing PMI for April.


The Euro suffered on Monday on the soft economic data from the Eurozone. German Retail sales, Italian CPI/HICP, and German HICP came out lower than expected. The drawback in this economic indicators will add pressures on the European Central Bank, reducing the chances of tightening its monetary policy any time soon.


The British Pound drifted lower on Monday to find support near two-month lows. Earlier in April, the Cable rose to its highest levels since the Brexit Referendum on expectations that the Bank of England will raise interest rate in May. However, the weak economic data and the dovish tone of Mark Carney, the Bank of England Governor, reduced these chances and took the Sterling lower.


The Australian dollar traded near five-month lows as the Reserve Bank of Australia kept interest rates unchanged at 1.50%. The RBA confirmed that a strong Aussie will lead to a slower economic pickup. Moreover, the bank expects that inflation will rise gradually as the economy strengthens. However, they noted the risks from the uncertainty in the outlook of the household consumption, low wage growth, and slow housing markets.


Gold slipped on Monday approaching major support area, as the US dollar regained strength. Gold is being pressured lately by higher bond yields that increased the opportunity cost of holding non-yielding bullion. The Federal Reserve will conclude its two-day meeting on Wednesday, a continuation of the hawkish monetary policy stance will add the pressure on Gold prices.


Oil prices climbed to almost three-year highs yesterday as the Israeli Prime Minister Benjamin Netanyahu signaled that the US president Donald Trump will dump the nuclear deal and re-impose sanctions on Iran. Trump appointed May 12 as a deadline for his decision. On the other hand, the Energy Information Administration (EIA) reported that the US Crude production rose 260,000 barrels per day in February. The inventories data from the American Petroleum Institute (API) is due today.

The most important economic events:

GMT Country Event Expectation Previous
8:30 UK Manufacturing PMI (Apr) 54.9 55.1
12:30 CA GDP (YoY)   2.7%
12:30 CA GDP (MoM) (Feb) 0.3% -0.1%
13:45 US Manufacturing PMI (Apr) 56.5 56.5
14:00 US ISM Manufacturing PMI (Apr) 58.6 59.3
18:30 CA BoC Gov Poloz Speaks     
20:30 US API Weekly Crude Oil Stock   1.099



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