The US Dollar weakened a further 0.7% in trade-weighted terms last week to a 7-week low. Despite slightly higher than expected US CPI-inflation in March US Treasury yields fell across the maturity spectrum, eroding the Dollar’s carry. Dovish FOMC members have been doing their job. At the same time strong US macro data, including a 9.8% mom surge in the Dollar-value of retail sales in March, have buoyed riskier assets and dented the relative attractiveness of the “safe-haven” Dollar. The S&P 500 has closed at record highs in eight of the past eleven sessions and was up 1.4% last week.
Price action in European currencies was more subdued, with the Euro and Sterling up 0.2% and 0.3%, respectively, while the Swiss Franc was broadly unchanged. Sterling gains were capped by news that Bank of England Monetary Policy Council Member Andy Haldane, regarded as one of the most hawkish of the nine MPC members, will step down from his role in June. Haldane, the Bank of England’s chief economist, has in recent months been vocal about his expectations of a swift recovery in UK economic growth and inflation. His successor has yet to be appointed.
Antipodean currencies outperformed with the Australian and Kiwi Dollars each gaining about 1%. The Reserve Bank of New Zealand, which held its policy meeting on 14th April, left its policy rate unchanged at 0.25% as expected and its statement stuck to script with few surprises. This was seemingly enough for markets to unwind some of their short Kiwi Dollar positions and for the Australian Dollar to also rally in sympathy. The Australian Dollar was further buoyed by the release on Friday of strong Australian labour market figures for March, with the only cloud a modest 20,800 fall in full-time employment.
