Dollar Rebounds as Rise in Oil Forces Fed to Remain Somewhat Hawkish (page 2 of 2)

Meanwhile over in Switzerland, leading indicators improved for the second month in a row. The Swiss economy is improving, which will keep rate hikes a possibility.

British Pound - Softer housing market, trade and GDP figures have sent the British pound tumbling against the US dollar today as prospects for another rate hike diminishes even further. The market was originally looking for faster house price growth in the month of March, but not only did house prices grow by a slower pace (0.4 percent actual versus 0.7 percent expected), but growth in the prior month was also revised lower. Fourth quarter GDP growth was also revised from 0.8 to 0.7 percent, but the biggest disappointment came from the current account deficit, which hit 16 year high of GBP12.7 billion in the fourth quarter. Things are beginning to turn ugly in the UK and if they do not improve soon, the market could begin to talk about the possibility of a rate cut rather than a rate hike. Inflation and housing data is due out tomorrow along with the CBI distributive trades survey. Analysts had been looking for an improvement, but given the recent trend of data, that could be difficult to achieve.

Japanese Yen - The Japanese Yen performed very well today as risk aversion sends investors out of their recently reestablished carry trade positions. The weakness in stock markets around the world and growing geopolitical risks (Iran showed pictures of the UK hostages on TV today) are all reasons that support the cautious sentiment. There was no Japanese data released last night, but this evening we are expecting retail sales. Consumer spending has long been one of the weakest parts of the Japanese economy. After a sharp drop in the month of January, analysts are looking for a strong rebound. However when it comes spending, we often see more disappointments than upside surprises.

Commodity Currencies (CAD, AUD, NZD) - The New Zealand dollar was one of the day's worst performing currencies. Despite the improvement in building permits and a 4 month high in approvals, the exodus out of carry trades has hit the currency hard. Fourth quarter current account is expected to improve tonight thanks to the narrower trade deficit that was recently reported, but with more important Japanese data, NZD/JPY could dictate the movements in the NZD/USD. The Australian dollar also fell victim to selling, but no data is expected from Australia until next week. The same price action was seen in the Canadian dollar which weakened despite the continual rise in oil prices. Even though there is no data from Canada tomorrow, a speech from central bank Governor Dodge may be worth watching.