FX Roundup: Dollar spikes against major crosses on US GDP data

Dollar stacked up gains against major currency crosses on Friday, following positive US macroeconomic data.

The US Commerce Department’s second estimate of the country’s gross domestic product growth for the fourth quarter was revised to an annualised 1% from an initial 0.7%, surprising analysts who had expected a mere 0.4% increase.

In response, the yen changed hands to a dollar at JPY113.65 around 1506 GMT, with the US currency 0.58% higher. The greenback also rose versus the Swiss franc fetching CHF0.9971, up 0.68%. The euro headed lower versus the greenback as well by 0.54%, changing hands at $1.0959.

Dennis de Jong, managing director at UFX.com, said, “Financial markets were expecting a slowdown in the world’s largest economy, so much so that conversations about a recession weren’t far away. Yet, with unemployment remaining low and wages increasing at their fastest rate since 2009, growth is back on the agenda.

“Add to that cheap fuel prices and low mortgage rates, and it may only be a matter of time until disposable incomes are fully realised and growth continues to speed up.”

Meanwhile, the pound’s Brexit woes continued as the currency languished at six-year lows versus the dollar and headed lower still, with a referendum on the UK’s membership of the European Union set for 23 June.

The sterling fetched $1.3914, shedding another 0.34% intraday against the greenback. However, the euro fell 0.20% against the British currency to change hands at £0.7876, with analysts opining that a Brexit was bad for the euro as well.

Kit Juckes, head of forex at Societe Generale, said: “Brexit would have negative growth implications for the rest of Europe, and more importantly could cause wider political uncertainty. So far, the response to any market signs of loss of confidence in the Eurozone has come from the ECB and that isn't likely to change.”

Commodity linked currencies had a tepid afternoon as the dollar strengthened. The greenback was broadly flat against the Canadian dollar changing hands at CAD$1.3527. A plethora of other commodity currencies also went sideways, particularly in Latin America, with the dollar rising 0.04% and 0.08% against the Mexican peso and the Brazilian Real respectively, but falling 0.44% and 0.57% versus the Chilean and Colombian pesos.

Finally, the Australian dollar fell 0.75% against the greenback exchanging at US$0.7182, as did the New Zealand dollar which was 0.48% lower exchanging at US$0.6691.