US Dollar Down on Mounting Consumer Pessimism (page 2 of 2)

Governor King also noted that although inflationary pressures remained strong and supported for the time being, he remained confident that price increases would slow to the 2 percent benchmark target set by the central bank within the next two years. Nonetheless, during the testimony the head central banker ended on a mixed view, overwhelming bearish sentiment by stating that upside risks continue to remain in the short term. Purported by rising manufacturing and strong retail spending, consumer prices may continue to ride high for now. Traders are betting on this single phrase as the market continues to price in the likelihood of a 25 basis point rate hike by June. Next up, pound proponents will be looking ahead to Nationwide housing prices. Should prices continue to show advancement in the preliminary evaluation, bulls will likely make a run in the short term.

Japanese Yen - After weakening for much of the early European session on the back of a lower-than-expected Corporate Service Price Index, the currency managed to break the 118.00 level during US trading. Annualized CSPI growth slowed to 0.4 percent from 0.6 percent in February and the breakdown showed that almost every single component fell or went unchanged with the exception of transportation costs, which jumped during the month. Comments by Bank of Japan Governor Fukui reiterated the data, but boosted inflation expectations for later in the year when he told the Diet's Upper House committee on financial issues that "price changes are expected to be around zero percent for the near term due to oil prices declines, but in the long term prices are on a uptrend as the output gap will move in positive territory."

Commodity Currencies - A sparse economic calendar left the Australian and New Zealand dollars trading in thin ranges today with price straying little more than 10 points from Monday's New York close. The sole release for the region was Westpac New Zealand Consumer Confidence, which dropped unexpectedly to 117.7 from 119.7 as higher fuel prices and rising rates crimped sentiment. Meanwhile, the Canadian dollar was buoyed by the Quebec election results, as the separatist Parti Quebecois landed in third place, eliminating much of the political risk of the event. Furthermore, the Liberals lost their majority to the nationalist upstart party Action Democratique. Quebec Premier Jean Charest, a member of the Liberal Party, will stay in power but this is the first time in more than 40 years that a Quebec premier has failed to win a second majority.