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Daily currency report

USD

The dollar shrugged off another set of soft data that was largely offset by solid subcomponents. Weekly jobless claims rose more than expected but the less volatile four-week average improved and remained consistent with underlying strength in the job market. The Philly Fed survey of Mid-Atlantic manufacturing growth moderated to a December 2016 low but the sub-index on employment strengthened to a May 2011 high. The reports strengthened the notion that the slowdown in March hiring was an aberration and could be set to accelerate as soon as April.

 

Sterling sustains most of its gains

Sterling maintained the better part of a rally that catapulted it to six-month highs above 1.29. Sterling negativity abated in a material way after Britain announced this week that it would hold early elections in June, three years ahead of schedule. Prime Minister Theresa May hopes the June 8 election will allow her Conservatives to widen their narrow majority in Parliament and put her in a better position to negotiate a favourable Brexit deal with the EU. While reduced Brexit uncertainty should buoy the pound, fundamentals remain a source of weakness with the economy at risk of moderating in the months ahead.

 

Election-proof euro?

The seemingly election-proof euro rose to three-week highs, benefitting from position squaring ahead of Sunday’s first round presidential vote in France, the bloc’s No. 2 economy. The euro has been among the least popular bets in recent months on expectations that the European Central Bank, which next meets on April 27, would trail the Federal Reserve in raising borrowing rates. The event risk posed by the French vote has been enough for many to reduce their bearish euro bets or wagers on the single currency weakening in the months ahead. Between now and early next week, chances are good for the euro to experience unpredictable swings in volatility.

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