The Pound Sterling declined against the US Dollar as the currency remained under pressure from Tuesday’s negative UK inflation data. Inflation dipped -0.1% in April, defying expectations for an unchanged figure. Against the Euro the Pound advanced sharply as economists raised their bets that Greece will default on its June 5 debt repayment to the International Monetary Fund (IMF).
US Dollar Index
The US Dollar exchange rate strengthened against the majority of its most traded peers after data released by the US Commerce Department showed that the number of building permits issued in April increased sharply. The report also showed that US housing starts soared by 20.2%. Economists will now be focusing on the publication of the Federal Reserve policy meeting minutes for May. A dovish report could soften the currency.
The Euro
The Euro tumbled to a two-week low against the US Dollar and weakened against most other major peers as concerns over a possible Greek default weighed upon sentiment. Athens must pay back €305 million to the IMF by June 5 but has warned that it does not have the funds to do so. Unless a deal is reached to release €7.2 billion worth of bailout funds, the nation will default.
Australian Dollar
The ‘Aussie’ softened against the Pound and US Dollar despite the release of positive domestic data. According to Westpac Banking Corporation, consumer sentiment rose 6.4% in May to reverse the -3.2% drop seen in the preceding month. The strengthening US Dollar was the main cause for the Australian asset weakening.
New Zealand Dollar
The New Zealand Dollar fell to its lowest level in a week against the US Dollar and softened against the Pound Sterling as the broadly supported ‘Greenback’ weighed upon commodity and emerging-market currencies.
Canadian Dollar
The ‘Loonie’ fell sharply against most major peers on Tuesday as oil prices plunged. Goldman Sachs predicted more bad news for oil, saying it will sink to $45 a barrel by October as recent gains in crude prices have encouraged more production. Also weighing on the currency were gloomy comments made by Bank of Canada Governor Stephen Poloz.
South African Rand
The South African Rand followed other emerging market currencies lower due to the sharp rise in the strength of the US Dollar. Further losses were restrained however; as a deal over wages was reached between the government and the 1.3 million employees who had threatened strike action.
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