The dollar is stable against most world currencies

During today’s trading, the US dollar is stable against the euro, the British pound, the Japanese yen and most global currencies, falling against some commodity currencies.

The DXY index, which is calculated by ICE and shows the dollar’s performance against the six major currencies (euro, Swiss franc, Japanese yen, Canadian dollar, British pound and Swedish krona), added 0.11% after losing 0.4% in the previous session, and the broader WSJ Dollar Index, which includes 16 currencies, rose 0.03%. The rise in both gauges has been limited, amid growing concerns about inflationary pressures.

Statistics released yesterday showed an unexpected drop in activity in the US industrial sector and a slowdown in growth in the services sector in April. Signs of weakening economic activity are severely limiting the Federal Reserve’s ability to cut interest rates in June and signal that inflation will slow.

The preliminary purchasing managers’ index (PMI) for the industrial sector, calculated by S&P Global, fell to a 4-month low of 49.9 points in April from 51.9 points in March. The services PMI fell to 50.9 points, a 5-month low.

Bundesbank President Joachim Nagel said yesterday that the European Central Bank (ECB) would consider cutting key interest rates if its new forecasts and the latest statistics confirm that eurozone inflation is moving towards the 2% target. “I want to make sure that the data is so reliable that we can actually do the first rate cut in June,” Nagel said.

Market attention this week is also focused on Thursday’s first-quarter US GDP data and the US income and expenditure report for March, which includes a key gauge of inflation (the PCE index) tracked by the Federal Reserve. The results are expected on Friday, and the data will give a clearer outlook on the central bank’s monetary policy.

The euro fell 0.15% to $1.0686 from $1.0701 at the close of previous trade. The latest survey revealed (see PMI above) that business activity in the eurozone fell by the most in April in nearly a year, as much as in Germany, prompting many analysts to revise their expectations that both the ECB and the Fed may not cut their prime rates this year. Yesterday afternoon, the ECB set a reference rate for the euro at $1.0674.

The British pound exchange rate was down 0.13% at $1.2433, compared with $1.2449 the previous day. Meanwhile, the Bank of England’s chief economist, Hugh Peel, said it was not yet time for the Bank of England (BofE) to cut interest rates. According to him, since the last meeting of the Central Bank, when it voted to keep the interest rate, there have been no significant changes in the economy of the United Kingdom.

The US currency rose 0.04% to 154.89 yen against the Japanese yen, compared with 154.83 yen a day earlier.

With a strong dollar, commodity currencies weaken if other factors take a bigger toll. That’s the case today for the Australian and New Zealand dollars, which are up 0.29% to $0.6507 per Aussie and up 0.03% to $0.5937 per Kiwi, respectively. The Australian dollar, in particular, rose to its highest level in nearly two weeks as stronger-than-expected inflation data supported expectations that Australia’s central bank will not cut interest rates anytime soon. The country’s consumer price index fell to 3.6% in the first quarter from 4.1% in the previous quarter, slowing for a fifth straight quarter but beating forecasts of 3.4%. Australia’s monthly consumer price index also accelerated to 3.5% in March from 3.4% in February, defying market expectations for no change.

The other two commodity currencies, which are heavily dependent on oil prices, the Canadian dollar and the Norwegian krone were down 0.13% to 1.3679 Canadian dollars per US dollar and 0.12% to 10.9184 kroner per US dollar, respectively. US light crude oil (WTI) rose 0.13% to $83.47 a barrel, while Brent, traded mainly in Europe, rose 0.15% to $88.55 a barrel*. Data from the American Petroleum Institute showed that U.S. crude inventories fell by 3.23 million barrels last week, reversing a 4.09 million barrel gain the previous week and defying market expectations for a 1.8 million barrel gain. The geopolitical situation in the Middle East continues to be in focus for commodity traders as Israel’s strikes on Gaza intensified.

*Exchange rates and oil quotations are current as of 10:30 a.m. Bulgarian time, sources Reuters and TradingEconomics.