US Dollar Falls Ahead of Final GDP Data

The United States (U.S) dollar continued its descent against its major trading partners early Thursday ahead of the final gross domestic product growth reading for Q4 and weekly initial jobless claims.

A quick summary of foreign exchange activity heading into Thursday showed that EUR-USD rose to 1.0879 from 1.0845 at the Wednesday US close and 1.0857 at the same time Wednesday morning.

EU business sentiment ticked down slightly in March while consumer confidence declined further into negative territory due to heightened inflation expectations, data released earlier Thursday showed.

The next European Central Bank meeting is scheduled for May 4.

GBP-USD rose to 1.2336 from 1.2316 at Wednesday’s US close but was below the 1.2347 level at the same time Wednesday morning. There are no UK data on Thursday’s schedule.

The next Bank of England meeting is scheduled for May 11. USD-JPY fell to 132.4281 from 132.8703 at Wednesday’s US close but was above the 131.8847 level at the same time Wednesday morning.

There are no Japanese data on Thursday’s schedule. The next Bank of Japan meeting is scheduled for April 27-28. USD-CAD fell to 1.3553 from 1.3558 at Wednesday’s US close and 1.3593 at the same time Wednesday morning.

There are no Canadian data on Thursday’s schedule. The next Bank of Canada meeting is scheduled for April 12.

USD: Dollar takes a breather as the yen takes a hit

Yesterday’s moves in the FX market provided another confirmation that we cannot apply the traditional frameworks to the interaction between currencies and other assets, ING Economics Francesco Pesole said in a note.

Pesole said that if diverging monetary policy paths in the US and Europe are gradually reconstructing the link between USD/European FX and front-end rate differentials, the interactions between safe-havens, high-beta currencies and swings in the equity market continue to prove rather unorthodox.

The analyst noted that an important point is that the dollar’s safe-haven status was perhaps dented by the fact that the banking turmoil has primarily been a US story.

“Furthermore, another safe-haven currency, the Swiss franc, got caught up with idiosyncratic banking stress, leaving the yen to benefit widely from the initial shock – especially considering its high inverse correlation with Federal Reserve rate expectations.

“This helps us understand the underperformance of JPY since the start of this week and especially yesterday. Improving sentiment asymmetrically hits the yen given it is accompanied by an unwinding of dovish Fed bets: the USD/JPY level might rebound to the 135.00 area, even though we favour another decline in the pair beyond the short term”, ING Economic stated.

“.. We think the small recovery seen yesterday could be one of many along a gradual decline path, but would favour some consolidation around current levels today”, Pesole added.

Today’s calendar sees the third release of fourth-quarter GDP figures, plus speeches by the Fed’s Thomas Barkin, Susan Collins and Neel Kashkari. #US Dollar Falls Ahead of Final GDP Data