Dollar Slips; Euro Pops Higher On Short Covering 

USD

After gaining much of yesterday, the U.S. dollar slipped against the majority of its rivals overnight. Risk appetite improved as Asian and European equity markets ticked higher.

The Fed’s Beige Book yesterday showed that the economy continues to grow steadily and that wage growth was broadening. However there is no rush to tighten monetary policy. The chances the Fed will boost rates again at its June meeting are currently at 57%, up from 50% on Monday.

Today’s economic docket has not provided the greenback any volatility. Jobless claims registered for 4K higher than expected but were largely ignored by traders. The Philly Fed Business Survey underwhelmed with a 22.0 reading, missing expectations for 25.0.

 

EUR

The Euro popped higher overnight and touched a three week low on technical trading as traders reduced short positions ahead of this weekend’s French elections. Despite looming uncertainty, traders have cut back hedging positions this week benefiting the Euro. The Euro touched a two-week high against the safe-haven Swiss Franc as well. Nevertheless, we expect the EUR/USD pair to settle into a wait-and-see stance before the elections. Recent polls have shown a slight dip for centrist candidate Macron. Macron’s apparent slid and a recent surge for far-left candidate Melenchon could spell danger for the Euro, and perhaps, the Eurozone as a whole.

 

NZD 

The New Zealand dollar is up against the U.S. dollar after dropping drastically yesterday. Kiwi consumer prices rose 2.2% year over year in the first quarter, beating expectations of a 2.0% rise. The jump in inflation increased the probability the Reserve Bank of New Zealand will hike interest rates next year. Probability is now at 55%, for a February 2018 hike, up from 52% yesterday.