The dollar is climbing against all of its major competitors Tuesday, extending its gains from the previous session. Today’s gains are being driven by the stronger than expected U.S. housing starts report and comments from ECB officials.
New residential construction in the U.S. showed a substantial increase in the month of April, according to a report released by the Commerce Department on Tuesday, with housing starts jumping to their highest level in over seven years.
The report said housing starts surged up 20.2 percent to an annual rate of 1.135 million in April from the revised March estimate of 944,000. Economists had expected housing starts to climb to a rate of 1.029 million from the 926,000 originally reported for the previous month.
The Commerce Department also said building permits increased by 10.1 percent to an annual rate of 1.143 million in April from the revised March rate of 1.038 million. Building permits, an indicator of future housing demand, had been expected to climb to 1.070 million from the 1.039 million originally reported for the previous month.
The European Central Bank will step up its asset purchases in May and June, ahead of the traditional holiday period when market liquidity will be lower, to meet its monthly target of EUR 60 billion, ECB Executive Board member Benoit Coeure said. Elsewhere on Tuesday, ECB Governing Council member Christian Noyer said the bank stands ready to take further steps to meet its price stability mandate.
In a speech delivered in London on Monday, Coeure said, “We are also aware of seasonal patterns in fixed-income market activity with the traditional holiday period from mid-July to August characterized by notably lower market liquidity.”
“The Eurosystem is taking this into account in the implementation of its expanded asset purchase programme by moderately frontloading its purchase activity in May and June, which will allow us to maintain our monthly average of €60 billion, while having to buy less in the holiday period,” the policymaker said.
“If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again. The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility.”
Bank of France Chief Noyer also acknowledged that the ECB’s quantitative easing has had a positive impact on inflation expectations. He said that the central bank was ready to take further action, if needed, to meet its mandate of keeping inflation “below, but close to 2 percent”.
“The Eurosystem is ready to go further if necessary to deliver on its mandate of maintaining inflation close to but below 2 percent,” Noyer said in a conference in Paris.
The dollar has climbed to a 1-week high of $1.1140 against the Euro Tuesday afternoon, from yesterday’s low of around $1.1450.
German economic sentiment declined more-than-expected to a 5-month low in May, as the lackluster first quarter growth figure weighed on economic outlook, survey results from the Mannheim-based Centre for European Economic Research, or ZEW, showed Tuesday.
The ZEW Indicator of Economic Sentiment fell sharply to 41.9 from 53.3 in April. This was the lowest reading since December 2014. Economists had forecast a much smaller drop in the index to 49.
The number of persons in employment in Germany continued to increase in the first quarter, albeit at a slower pace, preliminary figures from Destatis showed Tuesday. Total number of employed persons in the country rose 0.7 percent, or by 275,000 persons to 42.4 million in the first quarter from the corresponding period last year. In the fourth quarter, the increase was 0.9 percent.
Eurozone merchandise trade surplus increased notably in March from a year ago, as exports grew faster than imports, preliminary figures from Eurostat showed Tuesday. The unadjusted trade surplus advanced to EUR 23.4 billion in March from EUR 16.1 billion in the same month of the previous year.
Eurozone annual inflation remained flat in April as initially estimated after falling for four straight months, final data published by Eurostat showed Tuesday. Harmonized consumer prices fell 0.1 percent in March and 0.3 percent in February. The European Central Bank targets inflation below, but close to, 2 percent over the medium term.
The buck has extended its gains against the pound sterling to a third consecutive session, rising to over a 1-week high of $1.55, from Friday’s 4-month low of around $1.58.
U.K. inflation unexpectedly turned negative for the first time since 1960 on falling food and transport costs, official data showed Tuesday. Factory gate prices continued its downward trend reflecting lower crude prices.
Data from the Office for National Statistics showed that consumer prices fell 0.1 percent in April from last year, while it was forecast to remain flat as seen in March. This was the first annual fall since the official series started in 1996. Based on the comparable estimates, it was the first drop since 1960.
House price inflation in the U.K accelerated notably in March, after easing in the previous five months, figures from the Office for the National Statistics showed Tuesday. Average house prices climbed 9.6 percent year-over-year in March, faster than February’s 7.4 percent growth, which was revised from a 7.2 percent rise estimated earlier.
The greenback hovered around the Y120 level against the Japanese Yen early Tuesday, but has since broken out to a 1-month high of Y120.685.