Last Monday the US dollar managed to muster some gains after comments made by Loretta Mester, Cleveland Fed chief, and John Williams, president of the San Francisco Fed. Both released statements suggesting that the Fed could still introduce rate hikes this June, despite the subdued performance of the economy.
Comments made by the ECB Vice President Vitor Constancio, reiterating the Bank's resolve to implement quantitative easing, also helped support bullish sentiment in the US dollar. On the back of this April Eurozone manufacturing PMI stood at 52.0 The report's output price index nudged above 50 for the first time in eight months, suggesting inflation may turn positive.
On Tuesday the US dollar continued to strengthen early on, as the EURUSD fell towards the key 1.1050 price area. It was here that the EUR found buyers again reversing almost all the gains the dollar had made. Chicago Fed President Charles Evans made a statement saying that the Federal Reserve should hold off on raising short-term interest rates until early next year. He said that while the disappointing NFP number in March was likely transitory, unemployment at 5.5% was still higher than it ought to be. He said he expected inflation to continue running below the Fed's 2% threshold until 2018 before it returned to that target. Although he did add, however, that rate hikes could begin this year without impeding the recovery.
On Wednesday the EUR continued to gain against the US dollar helped by positive composite PMI data which rose to 53.9 in April, relative to the previous reading of 53.5. The Spanish economy reported significant increases in output expansion with numbers topping multi year highs.The German and French economies also posted gains although the rate of increase had eased in relation to previous months.
On the other hand, a larger than expected rise in the US trade deficit wieghed heavily on the green back, pushing the Eur higher.
On Thursday the Eur gave up some of its momentum as investors prepared for the Non farm payrolls report. Expected weakness in the jobs number had already been priced in after the surge in the Eur brought on by the worse than expected ADP National Employment Report.