The US dollar has reached its strongest level in eight weeks against the euro, advancing about 0.4% against that currency. Though bringing down the euro, a rise in the dollar has given a boost to European stocks. Despite a drop in US Manufacturing PMI to its lowest level since September 2009, greenback rally is continuing after Fed Funds futures show that the odds of an interest rate hike by July have now risen to about 54%. Regional Fed President for Philadelphia, Patrick Harker, spoke recently and said he expects two to three hikes in 2016. A gauge of the greenback against 10 major peers shows an increase of 0.2%. The stronger dollar is bringing down commodities, with gold slipping for the fifth day in a row and oil also bearing the impact. Still, crude is more resilient than it was in January.
The pound has jumped about 0.7% after another Brexit poll was conducted and results showed a solidifying lead for the “stay” camp, with a significant drive coming from older people who are switching sides. Meanwhile in the rest of Europe, a report shows that Germany saw a surge in investment, propelling economic growth. French business confidence is also improving. The positive economic data coming out of these two countries hasn’t helped the euro much, with Eurozone economic sentiment in the ZEW survey falling to 16.8 compared to the previous 21.5.
The Australian dollar has dropped around 0.8% after Reserve Bank of Australia Governor Glenn Stevens issued a statement that inflation was too slow. In China, it has been found that the central bank made an undisclosed decision back in January to manage exchange rates based on what is suitable, rather than a market-based technique. The People’s Bank of China determines the daily movement of the yuan based on its value against the dollar and a basket of currencies to maintain stability. How will the PBOC shape the yuan as greenback bullishness continues?
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