The dollar is pulling back against all of its major competitors Tuesday, following the release of the larger than expected trade deficit for March. The weak trade data suggests that GDP contracted in the first quarter. The better than expected ISM non-manufacturing report has been unable to slow the dollar’s decline.
After releasing a report last month showing the smallest U.S. trade deficit in well over five years, the Commerce Department released a report on Tuesday showing that the trade deficit widened substantially in the month of March. The report said the trade deficit soared to $51.4 billion in March from a revised $35.9 billion in February. Economists had expected a significantly smaller deficit of about $42.0 billion.
The much wider than expected deficit in March reflected the largest U.S. trade deficit since the $60.2 billion gap seen in October of 2008.
A sharp increase in imports contributed to the wider deficit, with the value of imports surging up 7.7 percent to $239.2 billion in March from $222.1 billion in February.
Economic activity in the U.S. service sector unexpectedly grew at a faster pace in the month of April, according to a report released by the Institute for Supply Management on Tuesday. The ISM said its non-manufacturing index rose to 57.8 in April from 56.5 in March, with a reading above 50 indicating growth in the service sector.
The increase came as a surprise to economists, who had expected the non-manufacturing index to edge down to 56.2.
The eurozone economy is set to grow more than estimated earlier and inflation is likely to gain momentum later this year, the European Commission said on Tuesday, citing positive economic tailwinds such as low oil prices, steady global growth, a weaker euro and supportive economic policies.
In its Spring 2015 Economic Forecast, the executive arm of the European Union lifted the Eurozone growth forecast for this year to 1.5 percent from the 1.3 percent seen in February. At the same time, the outlook for 2016 was retained at 1.9 percent.
The growth forecast for the EU this year was raised to 1.8 percent from 1.7 percent. The projection for the next year was maintained at 2.1 percent.
“Europe’s economies are benefiting from many supporting factors at once. Oil prices remain relatively low, global growth is steady, the euro has continued to depreciate, and economic policies in the EU are supportive,” the Commission said.
The dollar climbed to a 4-day high of $1.1065 against the Euro early Tuesday, but has since retreated to around $1.1200.
Eurozone producer prices declined as expected in March, figures from Eurostat showed Tuesday. The producer price index fell 2.3 percent year-over-year in March, slower than previous month’s 2.8 percent decrease. The figure was also matched with economists’ expectations.
The buck hovered around the $1.5100 level against the pound sterling early Tuesday, but has since dropped to around $1.5190.
British construction sector expansion slowed for a second month in a row in April, marking the weakest pace in nearly two years, amid sluggish output and new order growth, survey data from Markit Economics revealed Tuesday. The Markit/CIPS UK Construction Purchasing Managers’ Index fell sharply to 54.2 from 57.8 in March. Economists had forecast a modest drop to 57.4.
The greenback rose to a 1-month high of Y120.500 against the Japanese Yen early Tuesday, but has since pulled back to around Y119.900.
Markets in Japan remain closed for a holiday today.
The material has been provided by InstaForex Company – www.instaforex.com