Dollar Higher on Positive Economic Data; EUR/USD, GBP/USD Slump
The dollar rebounded against a basket of major currencies from a slump in the previous day as positive U.S. economic data lifted sentiment.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.21% to 89.33.
The Commerce Department said Tuesday U.S. homebuilding rose 1.9% to a seasonally adjusted annual rate of 1.319 million units in March, beating economists’ estimates for an increase to 1.270 million.
The report also highlighted a sharp 2.5% rise in building permits to a rate of 1.354 million units.
Industrial production in March, meanwhile, rose 0.5%, topping economists’ forecast for a 0.3% rise.
The uptick in housing starts was said to be transitory as much of the rise was on the back of an increase in the construction of multi-family homes – a category which not only contributes less to GDP but also is more volatile than the construction activity of single-family homes.
Pantheon said single-family homes accounts for more than two thirds of housing construction so “short-term swings in the multi-family numbers can't overwhelm the trend.” Construction activity tracks sales, so a sustained rise in housing starts in the near-term is unlikely, the research firm added.
Bullish remarks from San Francisco Federal Reserve Bank President John Williams also helped lift sentiment on the greenback as the Fed official said the U.S. central bank needed to continue on its gradual rate-hike path as inflation was closing in on the Fed’s 2% inflation target.
Also supporting a rebound in the dollar was sterling and euro weakness.
EUR/USD fell 0.26% to $1.2348 after weak economic data weighed on sentiment.
GBP/USD fell 0.33% to $1.4291 as traders appeared to take profit on the pair after it hit a new intraday high for the year of $1.4377.
USD/JPY fell 0.11% as the ongoing uncertainty surrounding the future of Japan Prime Minister Shinzo Abe attracted yen demand.
USD/CAD fell 0.26% to C$1.2535 as stronger Canada manufacturing data supported the loonie.