A predominantly bullish week for the US Dollar turned bearish after US data boosted risk appetite.
The US Dollar Exchange Rate was trading in the region of 0.7644 against the Euro as of 14:42 pm GMT
Several pieces of positive economic data have boosted the ‘Greenback’ over the last few days.
On Wednesday retail sales achieved their strongest level for five months and yesterday jobless claims were shown to have fallen by 10,000. Today an additional optimistic report has brightened the US economic outlook further.
According to figures compiled by the Federal Reserve, industrial output rose by 0.7 per cent in February, more than forecast and the strongest result for three months.
Following the report chief economist Michael Feroli stated: ‘It looks like a pretty good quarter for manufacturing. Capital goods are doing well, autos came back a little bit and there’s strength in consumer goods. It’s looked pretty broad-based.’
In a separate report issued by the Labour Department, US consumer prices were shown to have increased by 2 per cent in the 12-months ending in February while core CPI (which excludes food and energy) also climbed by 2 per cent in the same 12-month period.
In February CPI gained for the first time in four months, advancing by 0.7 per cent.
As Kengo Suzuki of Mizuho Securities Co comments: ‘Even as economic indicators improve, I expect the Fed to continue monetary easing […] There isn’t inflation concern yet in the US.’
In light of recent news the odds of the Federal Reserve bringing its aggressive quantitative easing policy to an end have dropped, investors have turned to higher yielding assets and the US Dollar has fallen as a consequence.
The ‘Greenback’ fell against several of its most traded peers, shedding 0.5 per cent against the Euro as the common currency broadly strengthened in the aftermath of a two-day meeting of EU leaders in Brussels.
Foreign-exchange strategist Sireen Harajli comments: ‘We think the Fed will keep doing what it’s doing for now, and maybe start tapering its open ended quantitative easing toward the end of the year. In terms of Dollar weakness, I think it’s more just risk-on’.
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