The U.S. dollar crept up slightly against the euro and yen, as the market awaits the minutes of the Federal Reserve??™s March policy meeting at 1800 GMT, which may indicate whether inflation is still the main concern of the central bank. In Q2, look for the Fed??™s monetary outlook, geo-political concerns, trade tensions with China, and foreign reserve diversification to drive the dollar.
Euro shot to record highs against the yen once again after the International Monetary Fund said it saw no need to interfere with the yen carry trade. Look for further euro strengthening ahead of tomorrow??™s ECB policy announcement.
The British pound rose to a 1-week high versus the dollar and a 5-week peak against the yen, supported by strong UK retail sales data and a Financial Times newspaper report on a possible tax break for UK-based firms. Retail sales boosted to its strongest annual pace in nearly one year, raising expectations of another rate hike from the Bank of England in the near term.
The Japanese yen fell to new all-time lows against the euro, Australian and New Zealand dollars after the IMF??™s comments regarding the yen carry trade. G7 finance ministers and central bankers are set to discuss this issue in Washington on Friday due to the yen??™s persistent weakness, giving Japanese exports an advantage.
The Canadian dollar extended its 3-1/2 month highs as housing starts rose 7.6% in March. Canadian Finance Minister is due to speak later this morning, while the Bank of Canada Deputy will speak Thursday. Look for the loonie to remain strong as geopolitical tensions have eased since the release of the British sailors and marines by Iran.
The Australian dollar eased back from a 16-year-and-five-month high, but stayed firm as investors await key domestic jobs data that might provide more clues on the outlook for interest rates.
The Mexican peso strengthened slightly against the US dollar and Mexican stocks edged down as losses in telecom and retail blue-chips offset gains in miner Grupo Mexico that were fueled by rising copper prices. Mexico??™s economy is closely tied to the US, whose consumers buys most Mexican exports and are big players in the Mexican stock, currency, and bond markets.
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