The greenback rose broadly against major currencies on a growing view the Federal Reserve may stop cutting interest rates soon. U.S. currency rose to 104.82 and 1.0431 against the Japanese yen and Swiss franc respectively. The single currency tumbled to a three-week low of 1.5555 versus the dollar on Friday after a European Central Bank report said money supply growth slowed last month more than economists forecast.
Eurozone M3 money supply, used by the ECB as a gauge of future inflation, grew at an annual rate of 10.3% in March (forecast was 10.8%), compared with 11.3% in the previous month. The Ifo German business sentiment index released earlier this week showed the biggest monthly fall since September 2001. The weak economic data and the comments from European Central Bank policy-makers' on worries about excess volatility in foreign exchange trading continued to pressure the single currency and dampened expectations for a rate hike in the euro zone.
U.S. consumer confidence fell for a third straight month. University of Michigan Surveys of Consumers’ April final consumer sentiment index fell to 62.6 from March’s final reading of 69.5. However, there were little reactions on the foreign exchange market.
Interest-rate futures showed a 24% chance that the Fed will keep interest rate unchanged at 2.25% at its April 30 meeting, compared with 2% odds a week ago. There is a 76% chance policy makers will cut rate by a quarter-percentage point to 2.00%. The yield advantage of two-year German government bonds over comparable-maturity Treasuries narrowed for a third straight day, dropping to 1.44 percentage points, from 1.49 percent on Thursday.
The single currency fell against the Japanese yen from 163.83 to 162.67 on Friday after the release of Japan's core consumer prices, which increased 1.2% in March from a year earlier, the most in a decade. Japan's five-year notes had their biggest slump in almost nine years on speculation that the Bank of Japan will increase its 0.5 percent target lending rate.
The Australian and New Zealand dollars dropped against U.S. currencies from 0.9422 to 0.9291 and from 0.7886 to 0.7783 respectively due to the decline in commodity prices. The British pound rebounded strongly from 1.9677 to 1.9890 on short-covering as the U.K. GDP came in line with expectation.
Next week will see the release of Japan’s retail sales and German Gfk index on Monday; U.K. CBI distribution trade and U.S. consumer confidence on Tuesday; Japan’s manufacturing, industrial production, unemployment rate and housing starts, German unemployment rate, eurozone business climate, HICP, unemployment rate and CPI estimate, U.K. Gfk survey, U.S. ADP employment, GDP, PCE, Chicago PMI on Wednesday; U.K. manufacturing PMI, U.S. PCE, jobless claims, construction spending and ISM manufacturing on Thursday; German retail sales, eurozone and German PMI manufacturing respectively, U.K. PMI construction and the closely watched U.S. non-farm payrolls on Friday.