Dollar Recovers; Euro Falls on Data

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Dollar Recovers; Euro Falls on Data

APRIL 04, 2019

After trading on the back foot early yesterday, the U.S. dollar edged modestly stronger overnight.

Overview

The economic docket in the U.S. is rather light with only weekly jobless claims due out, so look to geopolitical headlines to drive the dollar today.  President Trump is expected to meet with Chinese Vice Premier Liu He at the White House today.  There has been an air of optimism surrounding a potential deal but we will not count the proverbial chickens just yet.

There are a number of Fed speakers scheduled for today but they are unlikely to have a material effect on currency markets.  Attention will shift to tomorrow’s Non-Farm payrolls print.  Economists expect that the U.S. economy added 175K jobs in March after a dismal 20K in February.  Beyond the headline reading, we will be looking at revisions from the prior month’s data as well as average hourly earnings.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The Euro fell overnight following more disappointing data from the bloc’s largest economy.  German factory orders dropped over 8.0% in February, representing the biggest dip in ten years.  A separate report issued today by Germany’s five top research institutes expects the German economy to only grow 0.8% this year.  Previously the group had predicted 1.9% growth.

Germany is not the only major European economy struggling.   The Italian Treasury is set to cut is growth forecast for the year to only 0.1%.  The Italian economy is currently in a technical recession and rising debt.  Italy’s public debt is currently $2.7 trillion and threatens the financial stability of the country.

GBP

The British pound found some relief yesterday but is back under pressure in early trading.  The pound initially traded slightly stronger after lawmakers passed a bill to block a no-deal Brexit.  The measure passed the House of Commons by a single vote and will move to the upper house today.  Assuming passage, the result means that if an agreement is not reached by April 12th, Prime Minister Theresa May will need to ask for a long extension.  It is our view that Brexit uncertainty will continue throughout the summer, limiting any significant sterling gains.

The sterling has succumbed to general dollar strength to start the New York session.  While GBP/USD remains choppy, it has remained within a two percent range since the end of February.

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