US Dollar Rises on Upbeat Economic Reports
The US dollar rose following stronger-than-expected economic data during the week. Upbeat economic reports on industrial production and consumer sentiment propelled the greenback to recover losses and swing into positive territory. The ICE US Dollar Index rose 0.1% on the week, while the WSJ US Dollar Index was up 0.2%.
The Euro began the week by gaining against the US dollar but declined sharply on disappointing inflation data from the Eurozone. On the week, the EUR/USD pair was down 0.2%.
US retail sales fell for the third consecutive month in February, declining 0.1%, versus a revised 0.1% decline in January. Business inventories rose 0.6% in January, in-line with expectations. US producer prices rose 0.2% in February, beating estimates that called for a 0.1% gain. Initial jobless claims fell to 226,000 in the week ended March 10, from 230,000 in the prior week. The University of Michigan’s consumer sentiment index surged to its highest reading in 14 years, rising to 102 in March from 99.7 in February.
The US government’s monthly budget deficit widened to $215 billion in February, from $192 billion in the year-ago month. Consumer prices rose 0.2% in February, down from a 0.5% increase in January. The NFIB’s Small Business Optimism Index increased by 0.7 points to 107.6 in February, ahead of expectations of a 107.1 reading. The NAHB Housing Market Index slipped to 70.
Housing starts fell 7% to an annualized rate of 1.24 million in February, while building permits fell 5.7% to an annual rate of 1.30 million. US industrial production rose 1.1% in February, exceeding estimates of 0.3% growth. The number of job openings rose to 6.312 million in January, versus a revised 5.667 million in the previous month.
The British pound surged versus the greenback during the week, rising above $1.39 on Friday. The pound rose 0.7% on the week versus the US dollar.
Consumer prices in the Eurozone rose 1.1% year-over-year in February, down from the preliminary estimate of 1.2% and versus 1.3% in the prior month. Eurozone’s inflation rate in February was the lowest since December 2016. Eurozone industrial production gained 2.7% year-over-year in January, versus a revised 5.3% rise in the prior month. Employment in the region rose 0.3% in the fourth quarter, compared to 0.4% growth in the third quarter.
Consumer prices in Spain rose 1.1% year-over-year in February, versus a 0.6% rise in the prior month. French payroll employment in the private sector climbed 0.4%, or 82,300, in the fourth quarter, versus a 0.3% gain in the prior quarter. Inflation in France eased to 1.2% in February, versus a 5-year high of 1.3% in the prior month.
Italy’s retail sales were down 0.5% in January, versus a 0.9% decline in December. Italy’s consumer prices rose 0.5% in February. Consumer prices in Germany rose 1.4% in February, inline with the preliminary estimate.
The Australian dollar tried to rally versus the US dollar during the earlier part of the week, but subsequently gave up gains. On the week, the Australian dollar lost 1.7% versus the greenback. The NAB business confidence index slipped to 9 in February, versus a reading of 11 in January. The Westpac Melbourne Institute Index of Consumer Sentiment increased 0.2% to 103 in March versus 102.7 in February.
The greenback initially rose versus the Japanese Yen, but pared gains after reaching the 107.50 level. The US dollar declined 0.7% against the Yen last week.
Producer prices in Japan rose 2.5% in February, following a 2.7% rise in the prior month. Japanese industrial production declined 6.8% in January, versus 2.9% growth in December.
The US dollar climbed to a near nine-month high against the Canadian dollar during the week. The greenback rose above the 1.30 level. On the week, the Canadian dollar lost 2.2% versus the greenback, making it the worst performer of the week.
In the upcoming trading week, we see a number of high impact economic events, with the monetary policy decisions from the Federal Reserve and Bank of England headlining. Expectations are pinned on the Federal Reserve increasing interest rates during the FOMC meeting. Key economic reports from the US include durable goods orders, Markit PMIs and existing and new home sales.
The UK will release reports on inflation, unemployment rate, retail trade and CBI factory orders. Economic reports from the Europe include Markit PMI and consumer sentiment. Investors will also look forward to business confidence and Markit PMI reports from both Germany and France as well as industrial output and trade balance data from Italy.
Japan will issue reports on inflation rate and Nikkei Manufacturing PMI, while Australia will release data on unemployment and house price index.
Although the greenback gained against most of its major rivals, it slumped versus the Yen. The Japanese currency has been strong this month, rising against most major currencies, due to its safe-haven status amid political uncertainty. Moreover, the Yen has historically advanced ahead of the fiscal year end. It’s bullish trend is likely to continue this week.