• Spending plan falls short of expectations
  • Dollar index falls
  • Euro extends gains
  • Oil supports CAD

Good morning,

The dollar retreating again on Friday morning as President Trump prepares to embark on a nine-day trip across five countries starting with Saudi Arabia. Trump will also meet with Israel, the supposed source of the secret intelligence information that Trump shared with Russia. Investors have finally gotten some word on infrastructure spending, but it wasn’t the news they wanted to hear. Reuters headlines overnight announced that Trump’s budget proposal to include $200 billion for infrastructure over 10 years – according to a White House official. This is a far cry from the $1 trillion plan that officials had previously promised, perhaps reflecting a reluctance from Republicans to agree to spending that would add to the deficit.

Myriad concerns are pushing the DXY US dollar index to more than a six-month low as we close the week. Yet, this is not entirely a story of dollar weakness, a stronger euro is compounding the matter. The euro is highest weighted currency in the index, accounting for well over 50% of the basket. It is the most heavily traded currency against the greenback, and thus as the EUR/USD gains ground the DXY index has slipped.

The euro’s strength has been building, propelled not only by a weaker dollar but a stronger domestic picture. The Eurozone economy has shown broad based gains across multiple sectors, and widely across most of its member states. In Germany, the EU’s largest economy, producer prices hit 3.4% year-on-year in April, the highest since December 2011. This has pushed the euro to just under 1.12, the highest level against the greenback since before the election.

Canadian dollar climbed with oil Friday morning as oil crept up above $50 a barrel. CAD steadied against the greenback after a miss in two key data prints this morning. Headline inflation came in below consensus in April from a year prior, the same level as the previous month. The larger miss was in core retail sales, which fell to -0.2% in March from a month prior. Analysts were expecting a positive 0.2% print. This marks the second consecutive month of declines for the index, after January’s print was revised up to 2.3% – the highest reading in almost two years. This isn’t likely to have much sway on the Bank of Canada’s views as they have been quite cautious of late.

EURUSD: Euro pushed to the highest level against the USD since before the election as domestic data continues to impress.

GBPUSD: A dramatic dip overnight has left investors scratching their heads, but sterling has erased these losses to climb back above 1.30 against the USD.

AUDUSD: A weaker US dollar pushing the Aussie dollar slightly higher.

USDCAD: Despite a dip in domestic data, CAD is higher in light of higher oil prices and a weak USD.

USDJPY: The USD is slightly higher against the yen as investors take on some riskier assets in emerging markets, keeping a lid on JPY ahead of the weekend.