USD review

The USD Dollar Index traded a low of 93.133 which is the lowest since 22nd of Jan this year. It is down 7.8% from the 12 year high of 100.39 traded on March 13 earlier this year. The main driver of this US Dollar move has been weak US economic data. 

The first estimate of Q1 GDP was at 0.2% and after the massive trade deficit posted for March due to sharp upsurge in imports we could see this number being revised lower to show negative growth, when we see the second revision at the end of this month. Weak retail sales data for April does not bode well for Q2 GDP also and the large contribution that inventory build up had in the first estimate of Q1 GDP means that in Q2 we could see some this inventory buildup drawn down resulting in lower growth. 

The strength of the US Dollar is importing deflation into the US and has pushed the headline Producer Price Index (PPI) lower to minus 1.3% which is the lowest we have ever seen. The core PPI number which excludes the volatile food & energy component fell back into negative territory (M/M). 

US jobless claims fell further lower to 264,000 which pushed the 4-week average to a 15 year low. This number has been below the key 300,000 level for 10 consecutive weeks and it certainly depicts a scenario in the job market where companies are not shedding jobs. The reasonable quick rebound in crude oil prices has stopped some of the jobs losses in this important segment.