Dollar falls as weak US data supports dovish Fed view

Enrique Díaz-Álvarez17/Apr/2015Currency Updates


Mixed economic news across the pond caused the Pound to climb versus the Dollar for the fourth day this week, finishing the London trading session 0.6% higher.

The UK will still be in deficit in 2020 according to an IMF report released on Thursday. Revised forecasts suggest that the gap between spending and taxes will yield a £7 billion deficit in 2019-20, compared to a previous report from the Office for Budget Responsibility that forecast a £7 billion surplus. This will no doubt weigh on the conservatives election campaign as they, unlike Labour, are committed to generating a surplus in the overall budget.

A poll of property surveyors in the UK showed that a net balance of 21% of surveyors reported increases in house prices in March. Properties in the UK outside of London and the North are experiencing a “worrying” trend according to the report, with those surveyors recording price increases now outnumbering those recording falls by nearly a quarter.

Another busy Friday will begin in the UK with the release of unemployment data and average earnings from the Office for National Statistics at 9.30am.


Concerns over the future of Greece hit the headlines again on Thursday, although markets continue to overlook this, with the Euro appreciating by 0.1% on Sterling and by 0.6% on the Dollar.

Fears of a debt default in Greece resurfaced yesterday after it was claimed the Greek government had an informal approach to the IMF rebuffed. This sent the country’s borrowing costs soaring, with Greek three-year bond yields jumping more than 3.5% to around 27%. However, Greek Finance Minister Yanis Varoufakis denied the government had asked for a delay, while Managing Director of the International Monetary Fund Christine Lagarde all-but ruled out giving Greece more time to repay its loan. Speaking at a press conference in Washington, Lagarde claimed a move would be unwelcome, unprecedented and something that she herself would certainly not support. Meanwhile, Greece’s Prime Minister dispelled rumours of a default by claiming he was “firmly optimistic” a deal with creditors would be reached in time.

Any surprises in the revised March inflation data for the Eurozone this morning will likely cause Euro volatility when announced at 10am London time.


Wednesday’s gains were eliminated yesterday as the US Dollar declined by 0.6% versus its peers.

There was more soft data out in the US on Thursday. Initial claims for jobless benefits rose last week by 12,000 to a seasonally adjusted 294,000. While this marked the sixth consecutive week jobless claims were below 300,000, the four-week moving average, considered a more representative measure of the labour market, ticked upwards by 250 to 282,750. Continued jobless claims, which run on an additional one week lag, surprised on the upside, decreasing by 40,000 to 2.268M.

The number of new family homes constructed in the US in March increased on a month previous, although still fell short of expectations. The housing starts measure from the US Census Bureau came in at 0.926 million having last month fallen to its lowest reading since November 2013. Permits for the construction of new buildings also fell, down by around 70,000 to just under 1.04 million, after the economy stumbled at the beginning of the year under the weight of harsh winter weather. In other news, the Philly Fed manufacturing survey rose above expectations to 7.5 after a jump in the number of hires in the sector so far this month.

Having fallen into negative in January, inflation in the US is expected to have remained static in March for a second consecutive month, when released by the US Bureau of Labor Statistics at 1:30pm this afternoon.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.