US Dollar Surged Despite Mixed Economic Data

Market Reviews

The American currency has strengthened, despite weak economic indicators. US headline durable goods orders fell by 0.6% in May versus expectation of -0.9%. Ex-transport orders decreased by 0.3% versus expectation of 0.5% growth. Trade deficit narrowed to USD -64.8B in May. Wholesale inventories rose 0.5% mom in May.

The New Zealand dollar remains the weakest one for today and for the week, in anticipation of RBNZ rate statement. The RBNZ is expected to keep the OCR unchanged at 1.75%. The British pound follows as the second weakest for today. Canadian dollar is supported by rally in WTI oil, which breaks above 71 level.

The euro traded lower against the US dollar today. The ECB noted in its article titled “Monitoring the exchange rate pass-through to inflation” that exchange rate developments can play an “important role” in shaping the HICP inflation outlook, through “both direct and indirect channels”. The impacts are “spread out over several quarters”. And, the effect could be difficult to detect if it is “offset by a confluence of other factors”. Among the components, “energy and food, non-energy industrial goods” are most sensitive to exchange rate movements.

Euro appreciated by about 8% in nominal effective terms and by about 10% against the US dollar, between April 2017 and May 2018. The impact of past euro exchange rate appreciation has been clearly visible in import price developments.

Today’s data also showed, that Eurozone M3 rose 4.0% yoy in May. New Zealand ANZ Business Confidence dropped to -39.0, down from -27.2. New Zealand trade surplus widened to NZD 294m in May, beat expectation of NZD 100m. Goods exports rose 10% to NZD 5.4B, hitting a new high for total exports in a May month, and the second largest for any month. Goods imports rose 5.7% to 5.1B.