Euro Firm on Rate Outlook
The euro remains strong against the dollar after reaching a two-year high at 1.3576. The euro is well supported by expectations for two or at least one ECB rate hikes within this year.Voices from European monetary policy makers and politicians are on the side of a further strengthening in the euro. An ECB member Noyer said today the euro is a success story.
European Union official Almunia said euro has created stability and lower inflation. He added that euro exchange rate would not create problems.
Dollar Pressured, Shrugged Off Data
The dollar was still under pressure from persistent concerns on the slowing economy and negative sentiment on Fed interest rate outlook compared with rate hike possibilities from the ECB, BOE and RBA.The dollar was little changed following several key US economic reports released today. Retail sales increased 0.7% in March, up from a 0.1% rise in the previous month. Excluding automobile sales, core retail sales were up 0.8%, reversing a 0.1% fall in the previous month but below the estimate of 0.9%. New York Fed Manufacturing index rose from 1.85 to 3.8 in April, falling short of a call for 7.5. US Net Treasury International Capital Flows (TICS) unexpectedly rose from 74.6 billion to 94.5 billion in February, sufficient to cover the $58.4 billion trade deficit in that month and more than the upwardly revised January net inflow of $79.6 billion. Business Inventories rose 0.3% in February, above the estimate and previous reading of 0.2%.
EURUSD will face interim resistance at 1.3550, followed by 1.3580 and 1.36. Additional ceilings will emerge at 1.3620, backed by 1.3650. Support starts at 1.35, backed by 1.3480, 1.3450 and 1.3420. Subsequent floors are eyed at 1.34.
PPI Boosted Sterling
The sterling extended its rally against the dollar and yen after a stronger-than-expected UK inflation report. UK core Producer Price Index rose 0.4% in March, beating the forecast of 0.2%. The currency climbed to as high as 1.9938 versus the dollar, close to a key psychological barrier at 2.GBPUSD encounters interim resistance at 1.9940, backed by 1.9980, and 2. Subsequent ceilings will emerge at 2.0030, followed by 2.0050and 2.0100. On the downside, support begins at 1.9870, followed by 1.9850 and 1.9830. Additional floors are eyed at 1.98, backed by 1.9770 and 1.9750.
Carry Trades Weigh on Yen
The yen extended its loss across the board after G7 failed to criticize the yen weakness in the meeting held last Friday in Washington. G7 finance ministers repeated earlier calls for exchange rates to reflect economic fundamentals and urged greater currency flexibility in China. This is no wonder a green light for carry trades in which investors use the yen and swiss franc to fund investments in high-yielding currencies.USDJPY encounters interim resistance at 119.80, backed by 120 and 120.30. Subsequent ceilings will emerge at 120.50, followed by 120.80 and 121. On the downside, support begins at 119.50 and 119.30, followed by 119. Additional floors are eyed at 118.70, backed by 118.50 and 118.30.