US Dollar firms against its peers on upbeat data

Last week, the Dollar rose to its highest in more than two weeks as solid readings on the US economy helped strengthen the case for the Fed to continue tightening monetary policy this year. The number of Americans filing unemployment claims dropped to 237,000 for the week ended June 10, suggesting that slack in the labor market was shrinking, while the New York Fed’s Empire State business conditions index and the Philadelphia Fed business conditions index also both surpassed economists’ expectations.

Last Thursday as well, the Sterling jumped to its highest level of 1.2795 against the US Dollar, after two policymakers, Ian McCafferly and Michael Saunders, surprised markets and voted with existing policy hawk Kristin Forbes for higher borrowing costs. The unexpectedly tight 5-3 vote came despite signs of a slowdown in Britain’s economy, and uncertainty over Britain’s political outlook since Prime Minister Theresa May’s failure to win a parliamentary majority in last week’s election.

Meanwhile, the Japanese Yen remained near a two-week low against the US Dollar after the BoJ left in place its program to buy Japanese Government Bonds, kept its short-term interest rate target at minus 0.1% and its 10-year Government Bond Yield target at around 0%. As expected, the Central Bank offered a more upbeat view on private consumption and overseas economies, signaling its confidence that the recovery was gaining momentum.

The Loonie softened against the Dollar, paring of its gains as lower Oil prices offset upbeat domestic manufacturing data. Data from Statistics Canada showed Canadian manufacturing sales topped forecasts and hit a record in April as sales of Petroleum and Coal products rallied after two months of declines.