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THE TAKEAWAY: The U.S. Dollar ended the week lower as the British Pound rallied on stronger economic data and Yen gained ahead of the BoJ Policy Meeting conclusion.
The U.S. Dollar had a subdued start to the week as investors awaited key global economic data to gauge which direction risk trends would move as the month comes to an end. The first release to cause large moves in the currency market was the German Manufacturing PMI print which came in at 47.9 versus an expected value of 49. The German Services PMI also disappointed with a release of 49.2, lower than the expected number of 51. This sent the Euro lower against its American counterpart as confidence that growth in the region was stabilising, waned. The Greenback trended higher after the European data, and then lost ground as the U.K. BBA March Mortgage Approvals rose to 31,227 after a February print of 30,579. This resulted in the Dollar falling as the Pound showed strength as speculators saw this as positive news for the U.K. economy. As the Dollar continued to weaken against the Pound, the losses were magnified as U.K. GDP impressed with 0.6 per cent year on year growth versus a forecast of 0.4 per cent. The Pound jumped sharply on the news, sending the Greenback even lower.
Investors then sought the safe haven currency later in the week as newswires reported that a large American Investment Bank had joined other international banks in expecting an ECB rate cut in the medium term. Growth expectations for the Euro-zone were also seen to have been slashed which saw the Euro lose ground as the safe haven Dollar became in demand. Finally, as the Bank of Japan came to the end of their monthly policy meeting, Japanese Economy Minister Amari spoke to reporters in Tokyo and said that gradual deflation was still continuing. This saw the Yen gain against the U.S. Dollar as investors started to question whether ‘Abenomics’ would have the required effect. Newswires also reported that more was needed than just a weaker Yen as some manufacturers start to move their plants offshore to minimise currency risk. The U.S. Dollar Index, after starting the week around the 10,575 mark, moved to near the 10,510 area as the week came to a close.