The greenback slid against other major currencies on Tuesday as improving business sentiment in German spurred renewed optimism about the global economy, reducing demand for safer assets and boosting currencies perceived as riskier, however, dollar’s losses were limited by data showing a sharp decline in U.S. housing starts to a record low last month. In late New York session, the ICE future dollar index dropped 0.58 percent and last trading at 82.061, after falling to a session low of 81.903, while U.S. dollar weakened against the Japanese yen and Swiss franc and fell to session lows of 95.91 and 1.1070 respectively due to a rise in equity markets worldwide.
German investor confidence rose more than economists forecast to a three-year high of 31.1 in May from 13 in April after recent rallies in stock markets and data signaled the worst of the recession may have passed. The single currency strengthened against the dollar and yen after the release of data and rose to session highs of 1.3668 and 131.86 respectively before stabilising.
Sterling rallied broadly and touched its highest level this year against the dollar at 1.5525 as pessimism about Britain’s economy and financial sector eased while a rise in U.K. share price also boosted demand for pound. Earlier in the day, economic data showed that U.K. inflation slowed more than economists forecast in April to the weakest level in 15 months as the recession undermined price pressures in the economy. Consumer prices rose 2.3 percent in April from a year earlier compared to the consensus forecast of 2.4 percent and 2.9 percent in previous month.
On the data front, U.S. showed housing starts dropped on record in April as a plunge in work on condominiums and apartment buildings overwhelmed the second straight gain in starts on single-family properties. Commerce Department reported that housing starts declined 13 percent to an annual rate of 458,000 last month, led by a 46 percent tumble in multifamily starts, a category that tends to be more volatile.
On Wednesday, economic data releases include Japan GDP, Australia Westpac consumer confidence, German PPI, U.K. BOE minutes and CBI industrial trend, Switzerland’s ZEW index, Canada CPI, and U.S. FOMC minutes.