The dollar is little changed overall against its major rivals Friday afternoon. The U.S. currency is trading modestly higher against the Euro, but is close to unchanged against both the Japanese Yen and the British pound.
Investors appear to be taking a breather after a very eventful trading week. A number of major central banks held meetings and released statements this week, including the Bank of Japan, the Federal Reserve and the Bank of England. While there were no stimulus measures announced at any of those meetings a surprisingly dovish statement from the Federal Reserve was responsible for a significant weakening in the dollar.
The Fed signaled only two quarter-point hikes by the end of 2016, rather than four projected at its December meeting, taking into account an appreciating dollar, the absence of inflation pressures and the negative impact of the global financial turmoil.
There was a large amount of U.S. economic data released this week, following last week’s virtual drought of economic data. However, data was on the light side Friday, with only the report on U.S. consumer sentiment.
Consumer sentiment in the U.S. has unexpectedly fallen to a five-month low in the month of March, the University of Michigan revealed in a report on Friday.
The report said the preliminary reading on the consumer sentiment index for March came in at 90.0 compared to the final February reading of 91.7. The drop surprised economists, who had expected the index to inch up to a reading of 92.2.
The European Central Bank can reduce its deposit rate further into negative territory, if new shocks emerge to threaten inflation and growth, and the bank can also consider distributing money directly to people as an extreme step, the ECB Executive Board Member and Chief Economist Peter Praet said Friday.
In an interview to the Italian daily La Repubblica, Praet said, “As other central banks have demonstrated, we have not reached the physical lower bound.”
“If new negative shocks should worsen the outlook or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury,” the policymaker added.
The dollar has climbed to around $1.1275 against the Euro Friday afternoon, from yesterday’s 1-month low of $1.1341.
Eurozone’s labor costs growth accelerated in the three months ended December, after easing in the previous two quarters, figures from Eurostat showed Friday. Hourly labor costs climbed at a faster pace of 1.3 percent year-over-year in the fourth quarter, following a 1.1 percent hike in the previous quarter. In the second quarter of 2015, the rate of increase was 1.7 percent.
Germany’s producer prices declined at a faster-than-expected pace in February, data from Destatis showed Friday. The producer price index fell 3.0 percent year-over-year in February, exceeding economists’ expectations for a 2.6 percent decrease.
The buck dipped to a low of $1.4514 against the pound sterling Friday, but has since bounced back to around $1.4490.
Members of the Bank of Japan’s monetary policy board implemented a policy of negative interest rates in order to fuel the ongoing fight against deflation, minutes from the bank’s January 28 and 29 meeting revealed on Friday.
The policy board voted 5-4 to apply -0.1 percent interest rate on current accounts that financial institutions maintain at the bank. The board said it will cut the rate further into negative territory, if necessary.
The members added that downside risks included low oil prices, plus weakness from commodity exporters.
“There is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected,” the minutes said.
The greenback slipped to an early low of Y110.792 against the Japanese Yen Friday, but has since rebounded to around Y111.495.
The material has been provided by InstaForex Company – www.instaforex.com