US Dollar Slightly Lower Awaiting Tomorrow’s Job Report

Market Reviews

The US dollar is trading slightly lower today. US trade deficit narrowed to USD -49.0B in March from USD -57.7B in February (the lowest monthly deficit in six months). Exports increased by USD 4.2b to USD 208.5b in March, while imports fell by USD 4.6b to USD 257.5B.

Also from the US, initial jobless claims grew by 2k to 211k in the week ended April 28, below forecast of 225k. Continuing claims declined by 77k to 1.756m in the week ended April 28 ( the lowest level since December 8, 1973). US nonfarm productivity increased by 0.7% in Q1 while unit labor costs grew by 2.7%.

The EUR/USD pair practically did not react to the weak data on the Eurozone inflation for April. Inflation in the Eurozone slowed in April, underlining the case for the European Central Bank’s caution in removing stimulus measures. The Eurostat said its consumer price index fell to 1.2% yoy in April, compared to expectations for a reading of 1.3%. Core, or underlying inflation, which strips out volatile items such as energy and food, fell to an annual rate of 0.7% from 1.0% in the previous month.

The British pound is stabilizing against the dollar, departing from the 4-month lows, supported by favorable PMI data in the services sector of the UK. Activity in the UK service sector picked up slightly last month, but remained subdued. Research firm Markit said its services purchasing managers’ index increased to 52.8 in April, but was below the forecast of 53.5.

Peter Praet (ECB Chief Economist) stated, that the Eurozone economic slowdown came sooner than expected and factors holding back growth may persist in the near term but the European Central Bank is still making substantial progress in lifting inflation. Praet also said a sharp decline in some export sentiment indicators points out that global factors are becoming more prominent, particularly the threat of increased protectionism.