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The U.S. dollar remained near recent highs against the Euro and British pound overnight despite global equities tipping higher.  The U.S. dollar rose the most against the Swiss franc as stocks rose and after a report showed consumer price gains slowed in April.  Consumer prices increased 0.3% from a year earlier, failing to meet economist’s forecast of a 0.6% rise.  Norway’s krone gained on bets faster inflation will force the central bank to raise interest rates.  Norwegian underlying inflation, which excludes energy costs and taxes, quickened to a 1.3% annual pace in April from 0.8% the previous month.  Meanwhile, the U.S. economic docket showed that prices of goods imported into the U.S. rose more than forecast in April, driven by gains in fuel and food that may put pressure on some companies to raise prices.  The 2.2% increase in the import-price index followed a revised 2.6% gain in March.  Growing demand from economies in Asia and Latin America, paired with a weaker dollar, may keep pushing up the cost of goods from overseas.  Nevertheless, the direction of the U.S. dollar does not appear to have been affected by the data in early trading. 

The Euro remained lower versus the U.S. dollar even as European stocks rose and Greece’s newspaper Kathimerini said the International Monetary Fund is arranging fresh aid for Greece.  The newspaper reported the IMF is putting together an 80 billion euro to 100 billion euro plan, without saying how it got the information.  Speculation about a new financial assistance package comes after Standard & Poor’s yesterday downgraded Greece’s credit rating for the fourth time since April 2010.  Meanwhile, German Chancellor Angela Merkel today refused to commit to more aid, saying it is still too early to decide whether the Greek government will need further financial help to overcome the debt crisis. 

The Japanese yen slid against most of its peers as stocks rose and a Greek newspaper reported the IMF is arranging new bailout aid for Greece, sapping demand for the currency as a safe-haven.  Nevertheless, the yen remains near its highest level against the U.S. dollar since the Group of 7 nations intervened in currency markets following the record earthquake and following tsunami and nuclear crisis in March. 

The British pound weakened against the dollar on speculation the Bank of England may lower its forecasts for economic growth when it releases its inflation report tomorrow, making higher interest rates less likely.  Indeed, the Confederation of British Industry yesterday lowered its economic growth estimates for the U.K saying gross domestic product would rise 1.7% in 2011 compared with a February estimate of 1.8%.  The pound depreciated even as data today showed U.K. retail sales and house prices rose last month.  U.K retail sales at outlets open at least a year jumped 5.2% in April from a year earlier, the most in five years.  A house-price gauge also climbed to the highest level in nine months in April as demand for homes stabilized, a separate report showed.

US$ Retraces Some of Its Gains Of Late Last Week

After rallying against all of its major counterparts at the end of last week, the U.S. dollar retraced some of those gains versus the majority of its rivals but still remains much stronger than last Thursday’s open.  Indeed, the greenback strengthened over 3.5% against the Euro on Thursday and Friday, before pulling back slightly overnight.  The dollar fell the most against the Swedish krona and Norway’s krone as demand for higher-yielding assets increased.  The U.S. dollar also weakened against the commodity-based currencies as oil climbed today, rebounding from its biggest weekly loss since 2008.  There is no major economic data slated for release today in the U.S., and only import and export prices expected tomorrow.  International Trade is slated for Wednesday morning followed by producer prices, retail sales and weekly jobless claims on Thursday.  The consumer price index and consumer sentiment will round out the week on Friday.

The Euro rose against the dollar, rebounding from its biggest two-day drop since 2008.  The Euro found modest support after European Union officials agreed in an unannounced meeting on May 6^th to reconsider the terms of the 110 billion-euro lifeline Greece received last year.  In addition, March exports in Germany, Europe’s largest economy, jumped 7.3% from a month earlier, bolstering the case for tighter monetary policy in the euro region.  Swaps traders are betting the ECB will raise its target rate by 74 basis points over the next 12 months, a Credit Suisse Group AG index showed.  Another index forecasts 30 basis points of tightening by the Federal Reserve for the same period.  Nevertheless, the Euro has begun to weaken once again in early trading after Standard & Poor’s Rating Services said it lowered its Greece’s long-term sovereign credit rating to B from BB-.  The ratings may be lowered further, S&P said. 

The Japanese yen opened this weeks trading largely unchanged from Friday and near its strongest level since March 18^th, when Group of Seven central banks intervened to stem the yen’s strength after a record earthquake struck Japan.  Meanwhile, Bank of Japan board members left the door open for more measures to support the economy at a gather where they unveiled a lending program for companies damaged by a record earthquake, according to minutes of the April 6-7 meeting.  The central bank announced a 1 trillion yen credit facility for lenders in the earthquake-ravaged area at the meeting. 

The British pound maintained a tight range against the U.S. dollar but fell versus the Euro after the Confederation of British Industry lowered its economic growth estimates for the U.K. and a report showed house prices unexpectedly fell the most in seven months in April.  Gross domestic product will rise by 1.7% in 2011 compared with a February estimate of 1.8%, while expansion next year will be 2.2% instead of 2.3%, Britain’s biggest employer’s group said today.  House prices contracted 1.4% in April from the previous month, compared with 0.1 growth estimated in a Bloomberg survey.  Slowing economic growth comes as Britain implements the deepest government spending cuts since World War II, threatening to drag output lower.

US$ Rallies As ECB Fails to Indicate June Rate Hike

The U.S. dollar traded in a mixed direction and mostly unchanged versus the Euro and the British pound after the European Central Bank and the Bank of England left their respective interest rates unchanged.  However, the greenback has rallied in early trading as the ECB failed to indicate an interest rate hike in June, boosting the dollar.  The dollar fell versus the Japanese yen and the Swiss franc global stocks declined, boosting the two currencies as a safe-haven.  The greenback gained considerably versus the Canadian and Aussie dollars as the price of commodities, namely oil, dropped.  Meanwhile, the economic docket showed that productivity of U.S. workers slowed in the first quarter and labor costs rose as a growing economy prompted companies to begin adding jobs.  However, more Americans unexpectedly filed first-time claims for unemployment insurance last week.  Applications for benefits jumped by 43K to 474K.  Despite the data, expect the dollar to take its cue from commentary from European Central Bank President Trichet for clues to future monetary policy for the 17-nation economy.

The Euro remained largely unchanged versus most of its counterparts and near a 17-month against the U.S. dollar after the European Central Bank left its benchmark interest rate unchanged.  The decision by policy makers, led by ECB President Jean-Claude Trichet, to leave the rate at 1.25% was widely expected.  However, this morning’s commentary from Trichet has led to extreme volatility for the common currency.  The Euro fell nearly 1.0% after Trichet said the bank will monitor upside inflation risks “very closely.”  The ECB head dropped the word “vigilance” from his previous statements, suggesting the ECB may wait until after June to raise interest rates again.  Meanwhile, a report showed factory orders in Germany, Europe’s largest economy dropped led by a slump in demand for investment goods at home and abroad.  Orders fell 4.0% from February, where they rose a revised 1.9%.

The Japanese yen strengthened to its strongest level since central banks intervened to weaken the currency in March, as oil prices fell and stocks declined, stoking demand for the currency as a safe-haven.  Japanese Finance Minister Yoshihiko Noda said that today’s appreciation in the yen is different from the gain on March 18^th that prompted the intervention.  When asked whether Japan will intervene if the yen gains continue, Noda said, “I won’t comment on hypothetical situation.”

The British pound fell modestly against the U.S. dollar after a report showed U.K. services growth slowed more then estimated and the Bank of England kept it s key rate a record low.  As widely expected, the BoE , led by Governor Meryvn King, left the bank rate at 0.5% despite inflation pressures above 4.0%.  Meanwhile, a gauge for U.K. service industries fell to 53.3 in April from 57.1 the previous month, according to Markit Economics Ltd. 

US$ Falls Versus Euro on Speculation of Hawkish ECB

The U.S. dollar traded in a mixed direction overnight, but approached the lowest level since December 2009 against the Euro on speculation European Central Bank President Jean-Claude Trichet will signal further rate increases after policy makers meet tomorrow.  The U.S. dollar gained nearly 1% versus the New Zealand dollar as commodity prices fell and the Kiwi government held a cautious outlook for future growth.  Indeed, the Treasury Department said this week gross domestic product was “flat to slightly negative” in the first quarter and forecast 2011 growth will be about 1.0%.  The U.S. dollar has stayed lower against the euro and pound in early trading after a report showed private sector hiring slowed in April, encouraging the Federal Reserve to keep borrowing costs low.  Employment increased 179K in April, down from 207K in the month prior.  The print failed to meet expectations of a 198K gain.  Later this morning, ISM non-manufacturing is expected to register at 57.5, up from 57.3 in March. 

The Euro continued to push higher versus the greenback ahead of the conclusion of the European Central Bank’s two-day meeting and interest rate decision tomorrow.  Many investors expect the central bank to continue their hawkish tone and possibly hint at further interest rate hikes later this summer.  French Finance Minister Christine Lagarde said a strong euro benefits the region’s companies and signaled that inflation is a greater concern than growth in the region.  Lagarde said there is no need for further stimulus and also warned that consumer price increases are accelerating “a little bit.”  The Euro also found support after a composite index of European services and manufacturing rose to 57.8 in April, led by a surge in factory output. 

The Japanese yen held a tight range versus the U.S. dollar overnight and remains near its strongest level in over a month against the greenback.  The yen has gained against most of its counterparts recently on speculation China will introduce additional tightening measures to combat inflation, boosting demand for safer assets.  China’s central bank said in a report yesterday that taming inflation is its highest priority, signaling more tightening is possible even after a manufacturing survey showed growth may be moderating in Asia’s biggest economy.

The British pound strengthened against the U.S. dollar as European stocks continued to rise.  However, the sterling fell to the lowest level in more than a year versus the Euro after reports showed U.K. housing prices fell in April while construction growth slowed, boosting bets the Bank of England will keep rates at a record low.  The average cost of a British home dropped 0.2% from March, the Nationwide Building Society reported.  That is the first decrease since January.  Worsening economic data may ease pressure on the Bank of England to raise rates to curb inflation, which has soared to more than twice the central bank’s 2.0% target.  Policy makers will keep the key rate at 0.5 when they announce their next decision tomorrow, according to a Bloomberg survey.

The U.S. dollar rose against all of its major rivals, expect the Japanese yen, as stocks fell and concern about reprisal attacks following the death of Osama bin Laden boosted demand for the relative safety of the greenback.  Asian stocks, excluding Japan that is closed for Golden Week, dropped 1.4%, while European equities fell nearly 1.0%.  The Australian and New Zealand dollars fell as lower commodity prices damped demand for the nations’ assets.  The Canadian dollar initially gained overnight as Prime Minister Stephen Harper’s party won a majority of seats in Parliament, giving him a mandate to fund corporate and personal income tax cuts with curbs on spending.  However, the “loonie” retraced its gains as the price of oil fell.  The U.S. dollar may see further strength throughout today’s trading session as U.S. equities are also poised for a lower open.  Later this morning, U.S. factory orders are expected to gain 2.0% in March after contracting 0.1% in the month prior.

The Euro fell versus the U.S. dollar, but gained against the British pound, as European stocks declined.  Indeed, the Stoxx Europe 600 Index snapped an eight-day winning streak, the longest streak in 10 months.  Meanwhile, European producer-price inflation unexpectedly accelerated to the fastest in 2 ½ years in March, adding to concerns that surging energy costs will feed through to consumers and may prompt the European Central Bank to raise interest rates further.  However, the data was unable counter global risk aversion, causing the higher-yielding currency to fall.

The Japanese yen reached its strongest level in over a month versus the U.S. dollar as Asia’s benchmark stock index slid to the biggest loss in three weeks.  Financial markets in Japan remain shut today for the Golden Week holiday.  The yen typically strengthens in times of political, financial and economic turmoil.  Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders.

The British pound slumped against the U.S. dollar after a report showed U.K. manufacturing slowed, boosting bets that the Bank of England will keep its key interest rate a record low later this week.  The index of British manufacturing by Markit Economics and the Chartered Institute of Purchasing and Supply unexpectedly declined to 54.6 from a revised 56.7 in March.  Meanwhile, central bank Governor Mervyn King said yesterday that government indebtedness globally would worsen if interest rates were to rise.  The Bank of England is expected to keep its benchmark interest rate at a record low 0.5% when it announces its next decision on May 5^th, according to the median estimate of 43 analysts surveyed by Bloomberg. 

US$ Falls as Stock Rallies on News of Bin Laden's Death

The U.S. dollar traded in a mixed direction overnight even as global equities rose after President Barack Obama said al-Qaeda leader Osama bin Laden was killed by U.S. operatives in Pakistan.  Overall, the U.S. Dollar Index snapped a nine-day decline.  The Canadian dollar slid after the price of crude oil dropped the most in almost seven weeks on speculation that bin Laden’s death may ease the risk of Middle East supply disruptions.  Traders will also keep an eye on the federal election in Canada today.  Prime Minister Stephen Harper’s governing Conservatives are leading in recent polls, though likely without enough support to convert their minority government of majority of parliamentary seats.  With little data slated for release today, expect the greenback to continue to trade with the prevailing risk sentiment, falling modestly as stocks march higher.  10 a.m. sees the release of Construction spending and ISM manufacturing data, followed by factory orders on Tuesday.  ADP employment data and ISM Non-manufacturing will be released Wednesday and weekly jobless claims on Thursday.  Non-Farm payrolls and the unemployment rate will round out the week on Friday.

The Euro appreciated overnight as global equities ticked higher on the news the world’s most notorious terrorist was killed in Pakistan.  The currency continued to appreciate following data that showed manufacturing in the Euro region is picking up.  Indeed, the gauge for manufacturing rose to 58 from 57.5 in March, according to London-based Markit Economics.  That’s above an initial estimate of 57.7 on April 19 and a reading above 50 indicates growth.  Meanwhile, European Union Economic Monetary Commissioner Olli Rehn said at a press conference that Europe’s emergency aid packages have put Greece and Ireland on the right track and prevented the region’s debt crisis from spreading to Spain. 

The Japanese yen rose against the U.S. dollar as the currency continues to rebound from the multi-lateral currency intervention following the March 11^th earthquake.  Meanwhile, Japan’s wages slid for the first time in 13 months in March, underscoring the risk that slumping consumer pending may undermine the recovery.  In addition, Japan’s industrial production plunged 15.3% in March from February, the largest drop since data began in 1953. 

The British pound opened today’s trading largely unchanged versus its American counterpart as the U.K. banks are closed today in celebration of May Day.  The sterling has maintained a tight range against the greenback since Thursday as Britain was also closed on Friday for the royal wedding of Prince William and Kate Middleton.