US Dollar Jumps to a Two-Week High on Rising Treasury Yields

The US dollar rose versus most of its major rivals last week due to rising Treasury yields. The ICE US Dollar Index finished the week in positive territory, up 0.5% against its six major rivals.

US industrial production rose 0.5% in March, versus a revised 1% gain in February, and exceeded expectations of 0.4% growth. US business inventories were up 0.6% in February, in-line with estimates. Retail sales grew 0.6% in March, versus a 0.1% decline in February. Initial jobless claims fell 1,000 to 232,000 in the week ended April 14.

US housing starts rose 1.9% to an annualized rate of 1,319,000 in March, versus a revised 3.3% decline in February. Building permits were up 2.5% to an annual rate of 1,354,000 in March. The NAHB Housing Market Index declined to 69 for April, from a reading of 70 in March. The New York Empire State Manufacturing Index slipped to 15.8 in April, from 22.5 in March. The Philadelphia Fed Manufacturing Index climbed to 23.2 in April, from 22.3 in March, and topped market estimates of 20.1.

The euro fell to a two-week low against the US dollar, ahead of a European Central Bank (ECB) meeting in the upcoming week. The policymakers are likely to signal no change in interest rates. The euro tried to gain momentum versus the US dollar during the week; but found resistance around the 1.24 level and then moved lower.

The Eurozone’s current account surplus widened to €22.7 billion in February, from a revised €19.4 billion in the same month of the previous year. Eurozone’s consumer confidence indicator rose 0.3 points to a reading of 0.4 for April, exceeding expectations of -0.2.

Spanish trade deficit narrowed to €2.17 billion for February, from €2.61 billion in the same month of the previous year. Exports rose 2.3% to €22.59 billion, while imports grew 0.3% to €24.76 billion. German producer inflation rose to 1.9% year-over-year in March, versus 1.8% in February.

Italy’s trade surplus widened to €3.10 billion in February, from €1.88 billion in the same month last year. Current account surplus shrank to €0.84 billion for February, versus €1.49 billion in same month of 2017. Consumer prices rose 0.8% year-over-year in March, versus a preliminary estimate of a 0.9% gain.

The British pound started the week by rallying against the greenback; but plummeted following dovish comments from the Bank of England’s Governor Mark Carney. During the week, the UK currency fell around 1.3% versus the US dollar. UK unemployment rate slipped to 4.2% in the three months to February, from 4.3% in the September to November period. Retail sales declined 1.2% for March, versus a 0.8% rise in February.

The US dollar initially fell versus the Japanese yen, but pared losses and moved higher during the week. The US dollar settled at 107.65 at the end of the week. Japanese industrial production was flat in February, versus a revised 3.1% decline in the previous month. Consumer prices rose 1.1% year-over-year in March, versus a 1.5% rise in February.

The Chinese economy expanded 1.4% in the three months to March, down from 1.6% growth in the prior period and missing expectations of 1.5% growth. Industrial production rose 6.0% year-over-year in March, following 7.2% growth in the prior period. China’s retail sales rose 10.1% year-over-year in March, topping market expectations of a 9.7% gain.

Australia’s unemployment rate remained unchanged at 5.5% in March. The economy added 4,900 jobs in the month.

The US dollar initially slid versus the Canadian dollar; but recovered losses and rose again during the latter part of the week. Canada’s retail sales grew 0.4% in February, versus a revised 0.1% gain in the previous month. Consumer prices rose 2.3% year-over-year in March, compared to a 2.2% rise in February.

In the upcoming trading week, we see a number of high impact economic events, with the US GDP growth report for the first quarter headlining. Other key economic reports from the US include durable goods orders, Markit PMIs, S&P/Case-Shiller and FHFA home price index, existing and new home sales, University of Michigan’s consumer sentiment index, Chicago Fed National Activity Index and goods trade balance.

The UK will release reports on GDP growth for the first quarter, factory orders and GfK Consumer Confidence. The European Central Bank (ECB) will issue an update on monetary policy. Investors will also look forward to Markit PMI from Germany and France, Q1 GDP growth data from France and Spain; and inflation data from France and Spain.

The Bank of Japan will issue an update on its monetary policy. Japan will be releasing reports on retail sales, unemployment, industrial production, housing starts, Nikkei Manufacturing PMI and construction orders. Australia’s economic reports in the upcoming week include producer prices, inflation and foreign trade prices.


US Dollar Jumps to a Two-Week High on Rising Treasury Yields

The US dollar fell versus the Canadian dollar to as low as around 1.25 last week. The greenback bounced back later in the week, especially with Canada reporting weak CPI figures and oil prices rising to the highest levels since 2014. The upward momentum in the US dollar could continue in the upcoming week, with resistance around the 1.2724 level.