Dollar Bearishness Continues To Persist

US Dollar

Once again dollar weakness dominated the session as economic data was mixed much to the chagrin of dollar enthusiasts. Gross domestic product rose in line with expectations, climbing 4.8 percent in the first quarter reflecting positive economic reports in recent weeks.

Personal consumption figures were additionally higher, rising 5.5 percent as consumers were increasingly confident in current employment prospects and a strengthening housing sector. However, bucking the recent spate of optimism, subsequent reports were less than exemplary. Falling slightly in April, and contrary to the Conference Board's positive survey, consumer confidence according to the University of Michigan dropped to a reading of 87.4.

Below the consensus estimate of 89, the figure looks to be reflective of lower future expectations as the current assessment remained buoyed. Additionally, manufacturing in the Chicago region slowed in the month, printing a 57.2 reading against expectations of a 58. Dipping through the previous 60.4 witnessed for March, the survey results still point towards continued growth, albeit at a slower pace.

With the figure residing above the 50 expansionary minimum, the new orders index was slightly lower as prices paid remained higher on rising commodity and energy costs. Ultimately, both reports still purport a well founded economy. However, traders seem to think otherwise as the market is seemingly placing increased weight on dovish statements made by Chairman Bernanke yesterday. As a long as sentiment resides with a temporary halt, further positive economy data looks to add no respite to the current bearishness.

Euro

Euro reports were relatively mixed on the session with dollar based data attributed to most of the day's gains. Nonetheless, economic data in the region was in line with recently released comments by European central bankers leading speculation in the direction of a rate hike decision at the next European Central Bank meeting.

Aside from disappointing German retail sales data, both regional confidence and consumer price indicators ticked higher. Euro zone economic confidence, in fact, rose to a five year high, printing a 105.3 reading versus conservative consensus estimates of a 103.3 figure. The uptick looks to be reflective of sustained growth in the region's exporting sectors and, although minimal, improving employment prospects.

Subsequently, consumer prices rose at an annualized 2.4 percent rate according to today's estimate on higher energy and commodity costs in the month. As a result, with both reports adding to notions of a more hawkish bias on rates, speculation is leaning to a continuance of the current tightening bias. The next time European monetary policy makers will meet is late next week. Consensus is estimating a no rate change decision.

British Pound

Seems like factors are playing out in favor of the pound bull as today's GfK consumer survey was released in favor of a no rate cut notion by central bankers. Previously dropping to a negative 7 reading in the month of March, the spread survey improved to a negative 4 reading. Although still remaining below the zero figure, the reading is a definitive improvement and confirms previous surveys that have hinted at a consumer resurgence.

Bolstered by a stronger housing sector, consumer's hesitation seems to have transformed as individuals can expect a higher property valuation on sustained interest rates, thus translating into potential higher retail figures in coming months. The report is surely to influence next week's decision by policy makers, with the market already pricing in a no change decision keeping the benchmark repurchase rate at the current 4.5 percent.

Japanese Yen

There was a slew of data in the Japanese economy for the market to ponder as the currency pair broke to the downside, taking out the 114 figure. Adding to bearish dollar sentiment, the overnight's economic figures added to speculation of higher interest rates in the world's second largest economy. Released were reports concerning consumer inflation, industrial production and retail trade for the month of March.

Consumer price inflation remained in line with estimates with the core Tokyo component climbing slightly higher n the annualized comparison. Although attributed to higher energy prices, the increase is additionally seen as a reflection of increased consumer spending. Industrial production also increased in the month with retail trade remaining positive, rising 1 percent over the month.

With figures relatively positive, it now stands as only a matter of time before the central bank decidedly shifts to a tightening bias. According to today's meeting, policy makers may be ready to entertain such a notion as soon as mid summer, earlier than previously expected. Subsequent statements from the monthly meeting reflected this as policymakers shared expectations that inflation will likely build over the next two years as the economy steams ahead.