NEWS / Foreign Exchange

Daily FX Commentary

Dollar confidence slides

The dollar has remained on the defensive and weakened to lows near 1.3340 in European trading on Friday as stop-loss dollar selling increased.

The headline US manufacturing data failed to inspire confidence, although the underlying data was slightly more positive. The Philadelphia Fed index edged lower to 0.2 for March from 0.6 the previous month while the New York manufacturing index fell to a two-year low of 1.9 from 16.0 in February. The components within the survey were stronger with higher readings for the employment, prices and orders. These elements will offer some reassurance over future trends in the sector.

The headline increase in producer prices was bigger than expected with an increase of 1.3% for February while there was a 0.4% underlying increase. The data will maintain some inflation concerns, although the Federal Reserve is likely to be more concerned over wage inflation. Given subdued growth and high inflation data, there will be concerns that the US economy is facing stagflation. The consumer inflation data will be watched closely on Friday for further inflation evidence. A high reading would increase fears over stagflation and limit any dollar benefit.