The US dollar rises due to the weakening demand for protective assets
The weakening of the Middle East geopolitical tensions and the absence of new details about trade conflict between USA and China, have improved financial markets' sentiment and weakened the demand for safe assets. On Wednesday, the gold price retreated from the weekly highs, and the pair USD/JPY resumed the upward movement.
In the absence of geopolitical factors, investors drew attention to economic reports. Yesterday, the US dollar was supported by positive building reports. The US construction volume exceeded forecasts in March amounting to $1.319 million. The number of permits issued for the new houses increased by 2.5% instead of expected 0.7%.
Economic reports in the EU and the UK disappointed investors and caused a decline in EUR and GBP. The ZEW’s index of business sentiment in Germany fell sharply from 5.1 to -8.2 in April due to the foreign trade risks. The indicator of economic sentiment in the Eurozone also was much lower than expected. It dropped to 1.9 from 13.4 in February.
Wage growth in the UK was less strong than predicted by experts. It was 2.8% instead of 3.0%. Today's report on inflation in the country also disappointed investors. In March, consumer price growth slowed to 0.1%, and core inflation fell from 3.6% to 3.4%. The weakening of inflationary pressures reduces the likelihood of an increase in the BoE rate in the near future. It reduces the attractiveness of GBP for investors.
The announcement of the Bank of Canada meeting results is the main today's event. There are almost no chances that the regulator will raise the interest rate today. However, according to the string of positive economic reports and rising oil prices, this will likely happen in May. Therefore, investors will closely follow the BoC members' rhetoric.