The U.S. dollar lost against most majors even if it appreciated against safe haven currencies on Friday. The Syrian conflict concerns faded at the end of the week and boosted the USD versus the JPY and the CHF. The release of the meeting notes from the March Federal Open Market Committee (FOMC) proved to be a positive for the American currency as the Fed was more hawkish than expected. Next up for the markets will be the release of retail sales data in the U.S. and the Bank of Canada (BoC) rate statements. U.S. retail sales will be published on Monday, April 16 at 8:30 am EDT. The BoC will release its rate statement on Wednesday, April 18 at 10:00 am EDT.
· Hawkish Fed and dovish ECB not enough for USD
· U.S. Retail sales expected to gain 0.4 percent
· BoC to keep rates unchanged in April
Dollar Struggles With Too Many Fronts Open
The EUR/USD gained 0.45 percent during the week. The single currency is trading at 1.2335 after the release of the FOMC minutes from the March meeting where the central bank raised rates by 25 basis points. The European Central Bank (ECB) also released the notes from its monetary policy meeting. The contrast between the two was an important factor in the direction of the pair, but not the dominant one as Western states considered air strikes against Syria for its use of chemical weapons.
The White House’s tough talk on trade has eroded some of the confidence in the greenback as a reserve currency. In the case of a trade war breaking out it is unclear if America would be the winner after reciprocal tariffs would hurt U.S. producers. The Trump administration has opened too many fronts as uncertainty rises on the staff that will be left to manage the offensive.
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U.S. retails sales will prove decisive for a dollar looking for support. After a soft start in 2018 a rebound in March data is expected. Given the importance of U.S. consumers to the economy a strong retail sales indicator would appreciated the USD versus the EUR.
Canadian Dollar Rises Ahead of BoC Despite Weak Housing Data
The USD/CAD lost 1.29 percent in the past five days. The currency pair is trading at 1.2615 as trade war concerns have faded. The weakness of the USD and the strength of oil prices have taken the Canadian dollar to the top spot against the USD from all major pairs. The NAFTA treaty pessimism is now optimism as the U.S. has softened its hard stance and various reports are pointing to a lower demand on autos, but there is still a huge gap in other sectors that might not be bridged on the fast track the U.S. expects.
The Bank of Canada (BoC) is anticipated to keep its benchmark interest rate unchanged at 1.25 percent on Wednesday. The central bank has mentioned trade uncertainty as a big factor as well as the slowdown of the economy. Housing data this week revealed lower building permits than expected as well as a downturn in prices of new homes. A positive this week for the loonie was the release of the BoC Business Outlook Survey. Businesses remain optimistic about the economy despite the unclear fate of NAFTA. The central bank is expected to hike at least twice this year, but April is too early with so many unknowns still up in the air.
The fact that the U.S. is now reconsidering rejoining the Trans Pacific Pact in an effort to offset China’s growing influence is a good sign for the survival of NAFTA. Due to the escalation of the Syrian conflict U.S. President Trump had to cancelled his appearance at the Americas Summit in Peru, where the market expected some insight on NAFTA negotiations and how much did the U.S. negotiations were making a real effort.
Market events to watch this week:
Monday, April 16
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
9:30pm AUD Monetary Policy Meeting Minutes
10:00pm CNY GDP q/y
Tuesday, April 17
4:30am GBP Average Earnings Index 3m/y
8:30am USD Building Permits
Wednesday, April 18
4:30am GBP CPI y/y
10:00am CAD BOC Monetary Policy Report
10:00am CAD BOC Rate Statement
10:00am CAD Overnight Rate
10:30am USD Crude Oil Inventories
11:15am CAD BOC Press Conference
6:45pm NZD CPI q/q
9:30pm AUD Employment Change
9:30pm AUD Unemployment Rate
Thursday, April 19
4:30am GBP Retail Sales m/m
Friday, April 20
8:30am CAD CPI m/m
8:30am CAD Core Retail Sales m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar