The US dollar only saw temporary relief today and extended lower against a basket of currencies on the back of some dovish comments from St Louis Fed President James Bullard. Meanwhile, the ongoing political tumult in Washington D.C. continued to weigh on the greenback as well today.
The dollar index was last down 2% on the week as it fell to its lowest level since Donald Trump’s election victory in November. The greenback’s decline began earlier in the week on Trump’s firing of FBI director James Comey and allegations that he asked Comey to stop investigating the former national security chief. After some respite during Friday’s Asian and early European session trading, the dollar was weighed down further by comments made by the St Louis Fed President who was speaking at a presentation at the Washington University in St. Louis today.
Bullard said that the US central bank’s contemplated rate path may be overly aggressive for the markets and relative to data. The Fed official also noted that the US economic data since the March FOMC meeting have been relatively weak, especially the latest inflation numbers.
The dollar weakened the most against the euro and the pound but was steadier against the yen. The euro is on track for weekly gains of more than 2% against the dollar after it broke yesterday’s high and hit a new six-month high of $1.1196 today. Sterling edged back above the key $1.3000 level to reach $1.3028. Dollar / yen traded in a range between 111.10 and 111.70. The dollar also moved lower against the loonie despite some disappointing data out of Canada. USD / CAD touched its lowest level since April 27 at $1.3550.
Canada’s annual CPI rate held steady at 1.6% in April, missing forecasts for 1.7%. Retail sales data were better and saw a bigger-than-expected increase of 0.7% month-on-month in March, beating forecasts of a 0.4% gain and reversing February’s 0.4% decline. However, retail sales excluding autos fell 0.2%, contrary to forecasts for a 0.2% increase. The loonie briefly weakened after the data but the main driver behind the Canadian currency’s strength this week was the rally in oil prices, as Canada is a major oil producer. WTI oil rose above $50 a barrel on expectations for an extension to the OPEC deal to limit output at an upcoming meeting on May 25.
Origin: XM
