US Dollar Gains
Mounting inflationary concerns raised speculation that the Fed may be forced to tighten its monetary policy faster than expected, and pushed the US dollar to rally against all of the major currencies expect for the Japanese Yen.
As a result, all of the commodity currencies slide against the greenback amid surging oil prices, with the New Zealand dollar taking the biggest plunge as investors limited their holdings of high yielding currencies.
The US dollar picked up remarkable gains against the European currencies as the British Pound and Euro dipped to 1.9512 and 1.5366, respectively, with the Swiss franc following behind as the pair traded in the 1.0540 range.
A speech by Kansas City Fed President Thomas Hoenig sparked bullish sentiment for the greenback as he stated ‘serious’ upside risk for inflation - signaling that the series of rate cuts by the Fed has reached its peak.
The speech highlighted the growing concerns for inflation, and sparked bets that the Fed may look to increase rates this year in order to contain the current rise in inflation.
Amid the bullish sentiment taken on by currency traders, fresh economic data continued to reflect a troublesome housing market as Pending Home Sales dipped to a new record low for the second consecutive month as it fell 1.0 percent in March.
However, the credit market is beginning to show signs of recovery as the Consumer Credit index rose well beyond expectations to $15.3B from $5.2B in February.
The stock markets tumbled lower as oil surged to fresh record high of $123.53.
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