• US dollar in fifth week of losses
  • UK construction output rebounds
  • Expecting sideways trades today
  • Aussie retraces after recent gains

The US dollar is set for its 5th consecutive week of losses on trade-weighted basis following another poor week of data. Producer prices were once again negative as manufacturers cut prices in order to pass on lower raw material costs to consumers. The strong dollar is a factor as well as loose monetary policy elsewhere.

Overnight a sell-off in oil, gold and copper prices has allowed some stability back into USD. The psychological change however around US data is all-telling. Two months ago, people wondered, “How strong is it going to be?” While now, more people ask, “How low can it go?”

Today’s US industrial production and consumer confidence numbers are a case in point. Do we see momentum recover from a weather hit Q1? Will cuts in oil production continue to weigh? Has the strong dollar limited export demand? I think the last two questions are key and we could easily see a slide in industrial momentum as we have seen in consumption into Q2.

UK construction output this morning was decent. While construction was the major laggard for Q1, output rebounded higher in March. Recent noises from the industry – that deals, investment and spending would be held over until after the election – have faded following last Friday’s decisive outcome. A 1.6% increase in output in March will go some way to unwinding the negative contribution construction made to growth in the first three months of the year. Expectations are that Q1 GDP will be revised higher to 0.4/0.5% from the 0.3% initial reading.

source: tradingeconomics.com

Elsewhere today is a quiet day – including in Greece – and we anticipate some sideways trade in markets into the weekend.

EURUSD is lower this morning as traders seem happy to bank profits on their recent moves higher. Whether this has stemmed from a move in bond markets or has caused the move in sovereign debts is up for discussion. Either way, bond yields are falling and the euro is moving lower too.

GBPUSD is very similar to EURUSD today; GBPEUR is quiet and therefore any slippage seen here is more of a dollar strength story than sterling weakness. It has been a great week for sterling and we can easily see gains being given away next week

USDCAD is back above 1.20 as crude has slipped overnight, with the loonie not being allowed to take advantage of a strong manufacturing sales number in March.

AUDUSD is the largest faller of the session after being the largest gainer in the past two. There is no reason to actively move out of AUD positions quite yet. Markets are merely equalising what had become quite an overbought trade.

Have a great day and a better weekend.