- US dollar under pressure on revised softer Q1 GDP
- Euro extends losses on ECB Draghi comments
- Yen strengthens amid China concern
USD – The US dollar strengthened against the euro and pound and weakened against other major currencies after final data showed U.S. gross domestic product growth was softer than previously estimated in the first quarter, held back by a moderate pace of consumer spending, weak business investment and declining exports. Gross domestic product expanded at a revised 1.8 percent annualized rate from January through March, down from a prior estimate of 2.4 percent. Household purchases, which account for about 70 percent of the economy, were revised to a 2.6 percent advance compared with the 3.4 percent gain estimated last month.
EUR – The euro fell to a three-week low against the US dollar and slipped against the yen after European Central Bank President Mario Draghi highlighted downside risks to euro zone growth. Its losses accelerated after Draghi also stated yesterday that monetary policy will remain accommodative as inflation was low. Today he commented that the ECB was ready to act, when needed. Adding to pressure on the single currency were newspapers reporting that Italy risks losing billions of euros on derivative contracts it restructured at the height of the debt crisis.
GBP – Sterling fell against the US dollar after Bank of England policymakers dampened expectations of policy tightening and cautioned that the British economy was still weak. In contrast, sterling rose to a near one-month high against the euro as concerns about recession-hit euro zone, Britain's largest trading partner, came back onto investors’ radars. The pound's recent gains against the greenback on slightly better UK data, proved fleeting after BoE policymaker Paul Tucker indicated interest rate hikes were still some way off, while fellow policymaker David Miles reiterated his calls for more stimulus.
JPY – The Japanese yen rose versus most of its 16 major counterparts as Chinese equities declined for a sixth day, even as the central bank gave the first official signs of relief for a cash squeeze in the economy. Japan’s currency rose as the Shanghai Composite Index slid as much as 1.9 percent. Although the yen is still working as a safe haven, it has tumbled 7.1 percent this year, the biggest decline among 10 developed-market currencies.
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Commodity Currencies – The Australian and New Zealand dollars steadied against the US dollar after an early attempt to push higher failed as Chinese stocks extended their decline. This came even after China's central bank tried to soothe market fears of a liquidity crunch. Worries about slower growth in China coupled with the risk of the Federal Reserve scaling back its massive stimulus program this year have conspired to knock the Aussie lower. The Canadian dollar firmed against the US dollar as the greenback came under renewed pressure after the release of weaker-than-expected U.S. economic growth data. The loonie, however, was stronger against most other currencies.
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