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US$ Dolllar Index Gains for Record 13th Day

USD ­	The U.S. dollar held onto much of its gains from yesterday’s trading and extended its rally versus the British pound and the Japanese yen.  Indeed, the U.S. Dollar Index rose for a 13th straight day, the longest run of gains on record as Greek leaders prepare for new elections and as Italian and Spanish bonds rose.  Meanwhile, the U.S. economic docket showed that builders in the U.S. broke ground on more homes than anticipated in April.  Housing starts rose 2.6% to 717K annual rate, higher than March’s 669K pace that was stronger than previously reported.  Later, industrial production is expected to rise to 0.6% in April after stagnating in March. Later today, the Federal Reserve will release its minutes of its April 25-26th policy meeting.  Chairman Ben S. Bernanke said after that meeting he’s prepared to “do more” to boost the recovery and ensure inflation remains close to target.  Any further hints of possible quantitative easing could stunt the dollar’s gains.
EUR	The euro traded in tight ranges overnight, unable to rebound from yesterday’s slide against its major counterparts. The euro fell yesterday after news broke that Greece would be holding another election to solve their political deadlock, raising concerns the country could be setting the stage for a euro zone divorce. The European Union’s statistics office reported that euro zone inflation slowed last month, falling to 2.6% from 2.7% in March. Exports in Europe fell 0.9%, as the economy continues to struggle amid rising unemployment and stifling budget cuts, preventing prices from increasing.
GBP	The British pound fell to a one-month low overnight after Bank of England Governor Mervyn King reopened the possibility of increasing quantitative easing when saying, “one could make the argument for doing more asset purchases or indeed fewer asset purchases”.  King went on to say “the outlook for growth is somewhat weaker than in February”, signaling that additional QE may in fact be the more probable expectation, as the BoE remains ready to respond to euro zone developments and subdued growth. The Office for National Statistics released a report today showing U.K. jobless claims fell again in April, as the unemployment rate contracted to 8.2% from the prior 8.3%.
Others	The greenback continued to march higher against the commodity-based currencies as the price of energy and metals continue to fall.  Indeed, the U.S. dollar is currently trading at 5-month highs versus the Australian dollar and the South African rand.

 

US$ Holds Near Recent Highs

USD	The U.S. dollar slid modestly overnight against the majority of its counterparts as the European economic docket showed the EU avoided a second recession in three years.  Nevertheless, the greenback remains near its recent highs against the majority of its counterparts, including 3-month highs versus the Euro and 5-month best against the Australian dollar.  This morning’s economic calendar provided little in the way of surprises.  The main measure of the cost of living in the U.S. was unchanged in April, restrained by a drop in energy prices.  Consumer CPI on a year over year basis fell to 2.3%, from 2.7%, supporting the view of the Federal Reserve’s policy makers that inflation will ease. In addition, retail sales in the U.S. rose in April at the slowest pace of the year, but in line with economist’s expectations.  The 0.1% gained followed a 0.7% increase in March, according to the Commerce Department.  A separate report showed that manufacturing in the New York region expanded more than forecast in May.  The Empire Manufacturing print registered at 17.1 this month, from 6.6 in April. The data has had little affect on the dollar.  We may see the greenback “take a breather” as the currency consolidates at its new, higher levels.
EUR  ­	After touching on four-month lows in yesterday’s trading session versus the greenback, the euro strengthened overnight on news the euro zone economy dodged contraction in the first quarter. Euro zone gross domestic product printed 0.0% today, better than the expected –0.2%. Germany was the primary contributor to avoiding recession, expanding 0.5%, surprising forecasts calling for 0.1% growth. Despite Germany’s fortune, southern EU members were not as lucky. Greece saw its economy shrink by 6.2%, and Italian GDP fell 0.8% as the growing divergence between euro members may cause added pressure. The political standoff in Greece has Luxembourg’s Prime Minister Jean-Claude Juncker discussing a Greek extension to meet their budget if a pro-austerity government is elected.
GBP	The British pound fell against the U.S. dollar overnight, and came off a three and a half year high versus its euro counterpart after a German led euro zone avoided recession, convincing some investors to take on euro exposure. The Office for National Statistics reported the U.K. trade deficit shrank to 8.56 billion pounds in March. The debt crisis in Europe continues to undermine demand in the U.K.’s largest market abroad. U.K. exports are coming under added pressure as the pound continues to strengthen, making British goods more expensive for overseas buyers at a time when the economy could use a boost from exports to jumpstart growth.

 

Euro Falls to Fresh 3-Month Lows; Aussie Falls to Parity

USD ­	The U.S. Dollar continued its march higher versus the majority of its counterparts overnight as Greek policy makers struggle to form a government and as the economic docket showed that euro-area industrial production unexpectedly declined.  The greenback also pushed back below parity for the first time this year against the Australian dollar. There is no major economic data slated for release today but the dollar could be poised to move higher as U.S. equity futures point to a lower open and commodities look to continue their slide. Tomorrow sees the release of the Consumer Price Index and Retail sales, followed by housing starts and industrial production on Wednesday morning.  The Fed will release its minutes from its last FOMC meeting on Wednesday afternoon.  With no data expected on Friday, weekly jobless claims and the Philly Fed index will round out the week on Thursday.
EUR	The euro continued its May decline over the weekend, falling to a new three-month low against the U.S. dollar as the Greek political impasse spills into a second week. Euro zone industrial production unexpectedly declined in March, slipping 0.3% from February. Rising unemployment and reduced government spending are having a devastating effect on demand in the euro zone. As a result, gross domestic product is expected to show the economy contracted in the first quarter when released tomorrow morning, sending the euro zone into a recession. Euro zone finance ministers will meet today in Brussels, as investors will be looking for plans to come out discussing how to deal with the political instability in Greece.
GBP	The British pound stayed in tight ranges over the weekend against the greenback as the currency continues to fill the role of the “anti-euro”. As political turmoil persists in the euro zone, investors looking for a safer European exposure than the euro continue to prop up the pound sterling. Tomorrow, the International Labour Organization will release jobless claims and the unemployment rate, both predicted to show an increase from March. There is no significant data scheduled to debut in the U.K. today.

 

US$ Holds 3-Month High Versus Euro

USD	The U.S. dollar traded in relatively quiet ranges overnight, as the greenback appears to be settling in its new, higher ranges.  Indeed, the U.S. dollar is currently sitting at 3-month highs versus the Euro.  The safe-haven currency also found support after JPMorgan Chase & Co announced a $2 billion trading loss after an “egregious” failure in a unit managing risk. This morning’s economic docket showed that wholesale prices in the U.S. fell in April for the first time in four months, led by a decline in fuel costs.  The producer price index dropped 0.2% after no change in March, Labor Department figures showed.  Later, the University of Michigan Confidence reading is expected to register at 76.0, down from 76.4 in April.
EUR	The euro continued trading in tight ranges overnight, as the market looks towards Greece for solid developments in their political impasse. Antonis Samaras, the leader of Greece’s New Democracy Party, has vowed to remain in the euro if he plays a role in the next administration. However, there are concerns Samaras will renege on the strict austerity measures deemed necessary by the Troika to receive bailout funds. The European Commission expects euro zone gross domestic product to increase 1.0% in 2013 after contracting 0.3% this year. Spain is the only member expected to remain in recession throughout 2013, with the economy shrinking 1.8% this year and 0.3% in 2013. German CPI fell to a 14-month low in April, at 2.2%. Inflation pressures will likely subside as oil continues to slide, down nearly 10% since May 1.
GBP	The British pound fell overnight after a report showed U.K. consumer confidence fell in April. The fall in confidence was predictable, after the British economy slipped into a recession in the first quarter. In fact, the recession may be deeper than originally thought, as construction output slipped more than previously estimated, falling 4.8% in the first quarter according to the Office for National Statistics. The Bank of England kept interest rates and their quantitative easing program unchanged yesterday. Next week the BoE will release its Inflation Report, where Governor Mervyn King may open the door to add more stimulus to keep euro zone pressures at bay.

 

US$ Reaches 4-Month High Versus Euro; Rallies Against Commodities

USD ­	The U.S. dollar continued its slow rally across the board overnight, gaining against all of its major counterparts, except the Japanese yen.  The safe-haven greenback has found support as Greek politicians continue to struggle to form a new government, fueling concern that the embattled nation may be forced to leave the currency bloc. The U.S. dollar gained the most against the commodity-based currencies as the prices of crude oil and metals slid.  The South African Rand fell to a one-month low versus the U.S. dollar as metals and other commodities make up 45% of South Africa’s exports. The economic docket remains light in the U.S. today.  The number of mortgage applications in the U.S. rose 1.7% last week, up from 0.1% the week prior.  Later, wholesale inventories are expected to fall to 0.6%, from 0.9% in February.  The data is unlikely to have a significant impact on the U.S. dollar.  Therefore, expect the greenback to test technical levels versus its major rivals and possibly push higher as rising Spanish bond yields, falling commodity prices and slumping stocks may be the perfect cocktail for a sustained dollar rally.
EUR	The euro continued its decline this morning as focus remains squarely on Greece’s struggle to form a government after weekend elections. The EUR/USD is trading at the lowest level in four months, and European equities are sinking, with the Stoxx Europe 600 Index dropping 1.1% this morning. Spanish bond yields flirted with 6.0% as credit default swaps rose 13 basis points overnight. Italian bond yields increased 15 basis points, as the contagion risk surrounding a potential Greek exit from the Euro-Zone is providing ample downward pressure on the common currency.
GBP  ¯	The British pound declined to a two-week low against the U.S. dollar overnight as retail sales in the U.K. fell. This retail sales print continued the trend of disappointing data over the last month, and is fueling speculation of additional quantitative easing at tomorrows Monetary Policy Committee meeting. Last month the U.K. fell into a technical recession after MPC board members unanimously voted against increasing the bond-purchasing program. Tomorrow’s vote is expected to show more of a debate, as additional QE seems increasingly justified. However, economists predict QE will remain unchanged for at least another month.

 

US$ Inches Higher Versus Euro

USD ­	The U.S. dollar trended slightly higher and traded near its highs of recent ranges against the majority of its rivals.  The greenback has found support after anti-austerity elections this weekend in Europe rattled markets and as Greek politicians struggled to form a new government.  There is no major economic data slated for release today in the United States.  The greenback could push higher today as U.S. equity futures show that American shares will open lower, increasing demand for the safe-haven currency.  However, the U.S. dollar has been unable of late to break current ranges.  Therefore, if the dollar fails to continue its momentum and significantly break technical levels, we could see the currency float modestly lower and settle into familiar ranges throughout the rest of the week.
EUR	The euro continued its slow decline against the U.S. dollar overnight as Greece struggled to form a new government after elections this past weekend. Alexis Tsipras, the head of Syriza, the second largest political party in Greece will be the next to attempt to form a Greek government. Tsipras and his party are anti-austerity, and thus pro Euro exit, raising concerns of a disorderly default on the next Greek payment, and a subsequent exit from the euro zone. Italy held local elections that resulted in a new push toward anti-austerity policies, fragmenting the parliament and making Prime Minister Mario Monti’s job a bit more difficult. German industrial output rose more than economists forecast in March, fueling expectations the largest economy in Europe will avoid recession.
GBP	The British pound stayed in relatively tight ranges against the U.S. dollar, just off the recent eight-month high, as markets in the U.K. reopen today and are showing signs of topping out versus the greenback with the added risk to the Euro-Zone over the weekend. The Royal Institution of Chartered Surveyors (RICS) released a report today showing house prices dropped in April. Former BoE official John Gieve said the central bank could extend the bond-purchasing target this week in what is expected to be a very tight decision. In a Bloomberg survey, 43 out of 51 economists expect the Monetary Policy Committee to leave QE unchanged this month, with the remaining eight expecting an increase of 25B pounds.
Others	T he Australian dollar continued its decline against the U.S. dollar overnight after the nation reported a larger-than-expected trade deficit in March.  The currency also faced headwinds as the government announced

 

US$ Gains as European Elections Put Austerity in Doubt

USD ­	The U.S. dollar gained versus the majority of its counterparts as elections in France, Greece and Germany sparked concerns that austerity measures may be derailed.  The greenback continued its momentum from Friday when global equities rapidly sold-off, increasing demand for the currency as a safe-haven. There is no major economic data slated for release today or tomorrow in the United States.  Wholesale inventories and MBA Mortgage applications will hit the wire Wednesday morning, followed by the import price index, trade balance and weekly jobless claims on Thursday.  The Producer price index, and the University of Michigan consumer confidence print will round out the light weekly economic docket on Friday. With elections in European unable to significantly push the greenback out of its recent ranges, we may see the U.S. dollar continue to hold within a 2.0% range against the majority of its rivals.
EUR	The euro fell sharply over the weekend after French and Greek elections sent investors looking for safe-haven assets. In France, Francois Hollande defeated Nicolas Sarkozy and now will seek to implement policies of economic growth while distancing himself from even using the word austerity. In Greece, stocks fell the most in three and a half years after voters flooded towards anti-austerity parties, leaving the two main parties without a combined majority. The election has raised serious concerns about Greece’s future Euro-Zone membership status, as Citigroup Inc. sees a 50%-75% likelihood of a Greek exit in the next 18 months. The election results in Greece prompted German Chancellor Angela Merkel to stress the importance of the new government to follow through with the spending cuts agreed upon to keep funds flowing. There will likely be a heated debate in Greece over the scenarios surrounding what a Euro-Zone exit would mean, driving the markets over the coming weeks. German factory orders rose more than economists forecast in March, providing a much needed positive surprise after the weekend elections. Euro-Zone investor confidence fell for the first time in four months as the debt crisis continues to squash economic growth across the region.
GBP	The British pound stayed in relatively tight ranges over the weekend versus the U.S. dollar and continued trending higher versus the euro, near a 22-month high. The Centre for Economic and Business Research expects the unemployment rate to increase over the next five years in response to the increased spending cuts across the nation. A U.K. house-price index rose in March to a 21-month high as first time buyers sought to beat the clock on expiring property tax exemption.

 

US$ Erases Gains After Poor Jobs Data

USD ­	The U.S. dollar trended modestly higher overnight, gaining for its fifth day versus the Euro after a report showed European manufacturing and service industries shrank in April.  The greenback also found support ahead of elections in France and Greece this weekend.  However, investors seemed hesitant to significantly push markets one way or another ahead of this morning’s employment situation report. Employers in the U.S. added fewer workers than forecast in April.  Payrolls climbed 115K, the smallest gain in six months.  Economists had forecast a gain of 160K.  However, the print from March was revised upwardly to 154K, according to the Labor Department.  Nevertheless, the jobless rate fell to a three-year low of 8.1%. The greenback has seen muted reaction to the data but may be poised for a pullback as those who argue that the Fed will need to partake in additional quantitative easing will have another arrow in their quiver.
EUR	The euro depreciated against the U.S. dollar this morning after Euro-Zone PMI composite of manufacturing and services output contracted more than forecasted in April. The index came in at 46.7 from 49.1 in March, adding to the economic downturn across the region. Elections will be held this weekend in France in Greece and could reshape the Euro-Zone political landscape. France is expected to elect Francois Hollande, who would become the first Socialist President since 1981. In Greece, voters are ready to show their distaste for the strict austerity measures forced on them, and may be setting the stage for an exit strategy.
GBP	The British pound declined moderately overnight after U.K. house prices dropping the most in 1.5 years in April. Halifax House Prices fell 2.4% from March to an average of 160,000 pounds. Demand for homes is beginning to fade as the tax exemption for first-time buyers ended. U.K. 10-year government bonds are currently yielding 2.04%, and could break below the February 28 low of 1.98% this coming week. The sterling strengthened 3.5% since February, outperforming the 10 developed-nation currencies over that span.

 

US$ Continues Momentum Ahead of ECB

USD ­	The U.S. dollar continued its momentum from the day prior on speculation that European Central Bank President Mario Draghi may hint at further stimulus and as Spanish borrowing costs rose.  The economic docket today showed that fewer Americans that forecast filed applications for unemployment benefits last week, easing concern the labor market was taking a turn for the worse.  Jobless claims fell by 27K to 365K last week, a one month low, according to the Labor Department.  A separate report showed that productivity of U.S. workers fell in the first quarter. Tomorrow, a report is expected to show the U.S. added 160K jobs in April, up from 120K in March, according to a Bloomberg survey. Expect the direction of the dollar to be dictated by comments from ECB President Draghi following the central bank’s interest rate decision early this morning.
EUR	The euro extended its decline overnight before the ECB rate announcement this morning, w here the benchmark interest rate was kept at the record low 1.0%. ECB President Mario Draghi softened his stance on the economic recovery yesterday; one month after claiming Europe had seen the worst of the debt crisis, and that a new growth pact would begin to take effect. It seems Draghi may have spoken too soon, as austerity is suffocating economic growth and pressing unemployment to 15-year highs. There is now a growing sentiment that the ECB may have to cut interest rates to deal with a deteriorating economic outlook. Today, Draghi changed his tone saying, “the outlook is subject to downside risks”.  Spain met their bond auction target today at a debt sale, selling 2.52B euros of 3-year bonds at 4.04%, higher than the 2.62% in March.
GBP	The British pound continues to trade near the 1.62 figure versus the dollar, after regaining some of its losses versus the euro overnight. U.K. PMI services slowed in April to 53.3 from 55.3 in March. Bank of England Governor Mervyn King reported the economy is showing signs of recovery but is not “back to full health”. The Monetary Policy Committee will meet on May 10 to discuss the possibility of extending the bond-purchasing program to stimulate the economy.
Others	The New Zealand dollar fell to its lowest level in more than three months against the U.S. dollar after a report today showed the jobless rate unexpectedly rose. The unemployment rate rose to 6.7% in the first quarter, from a revised 6.4% in the previous quarter.

 

US$ Holds Near One-Month Lows v. EUR; Aussie Tumbles

USD	The U.S. dollar traded in a mixed direction overnight, trending near its worst levels of the current ranges against the Euro.  The Japanese yen also held near its 10-week high versus the U.S. dollar.  However, the greenback soared over 1.0% against the Australian dollar after the country’s central bank cut interest rates more than economists expected.  This morning’s economic data is expected to show the ISM U.S. factory index fell to 53 last month from 53.4 in March, according to a Bloomberg News survey.  However, readings greater than 50 signal growth. In addition, construction spending is expected to have risen in March to 0.5%, after falling 1.1% in the month prior. The data may not immediately move the direction of the dollar today but it may add to the recent narrative of improving stateside economic data and ease fears that U.S. growth may struggle moving throughout the rest of the year.
EUR  ­	T he euro is again testing one-month highs against the U.S. dollar as sentiment is beginning to shift away from austerity and towards growth. Spain, who has desperately tried to abide to the strict EU austerity demands, has since fallen into a double-dip recession with soaring unemployment at nearly 25%. With EU member economies faltering, there is a shrinking group of supporters backing Chancellor Angela Merkel. Dutch Prime Minister Mark Rutte, one of Germany’s biggest supporters, resigned earlier this week after losing his parliamentary support over the strict austerity measures. Elections in Greece and France scheduled this week will also shed light on the future of budget cutting strategies. Jean-Claude Juncker will be leaving his job as the head of the euro group within the European Union, as the battle to keep France and Germany in check is proving to be too much, saying, “They act as if they are the only members of the group”.
GBP	The British pound briefly slid in the European trading session after a U.K. report showed manufacturing PMI grew at a slower rate in April, coming in at 50.5 compared to 51.9 in March. However, this manufacturing data was unable to provide any lasting resistance, as the sterling once again opened near 8-month highs versus the U.S. dollar. The pound had a phenomenal April considering the circumstances surrounding their struggling economy, strengthening 1.3% against the greenback, and just below 2.0% against the euro. PMI construction will be released tomorrow, with PMI services to follow on Wednesday, both expected to print in line with manufacturing, showing a growth slowdown.
Others	The Australian dollar sold-off across the board after the Reserve Bank of Australia cut interest rates by 0.5%, surprising investors who were expecting a 0.25% cut.  The half point cut was “judged to be necessary in order to deliver the appropriate level of borrowing rates,” RBSS Governor Glenn Stevens said in a statement.