Dollar Ekes Out Small Gain Ahead of Good Friday Holiday, Long Easter Week-End

The U.S. Dollar traded mostly sideways against a basket of major currencies on Thursday after its two-day rally from a five-week low, hit earlier in the week, ran out of momentum as traders headed to the sidelines ahead of the Good Friday holiday and the start of the long Easter weekend.

June U.S. Dollar Index futures settled at 89.812, up 0.093 or +0.10%.

Despite the volatility between January and March and the seemingly two-sided trade, the index still poised to post a more than 2 percent loss for the quarter, its fifth straight quarter of declines.

Most of the price action this week has been fueled by month-end and quarter-end flows. The thin trading conditions due to the holiday-shortened week also contributed to this week’s volatility. Research shows that end-of-month and end-of-quarter rebalancing of portfolios by global asset and fund managers, tend to be dollar-supportive.

The dollar was also underpinned by upbeat economic data on Thursday. Data showed U.S. consumer spending rose marginally for a second straight month in February as households boosted savings, the latest indication that the economy lost momentum in the first quarter. Consumer spending increased 0.2 percent last month after posting a similar gain in January.

Other economic fundamentals remained strong, however. For example, the number of Americans filing for unemployment benefits dropped to more than a 45-year low last week. The Core PCE Price Index showed moderation in monthly inflation readings after prices pushed higher in January. In February, personal income rose 0.4 percent and has now increased by the same margin for three straight months. The University of Michigan said consumer confidence ended March at its strongest level in more than 14 years even after slipping slightly compared to its mid-month preliminary report.

There was some negative news, the Chicago Purchasing Managers Index (PMI) unexpectedly fell to a one-year low in March.

Euro

The Euro initially rose against the U.S. Dollar on Thursday as stronger-than-expected German unemployment data pointed to continued strength in the Euro Zone’s largest economy, but the currency failed to hold gains and was trading little changed on the day.

The EUR/USD settled at 1.2300, down 0.0007 or -0.06%.

British Pound

The Sterling edged lower in reaction to end-of-quarter portfolio rebalancing. The U.K. Current Account came in better-than-expected at -18.4 Billion. This was better than the -24.0 Billion forecast. The previous month’s reading was revised better to -19.2 Billion. Final GDP came in as expected at 0.4%.

The British Pound is set to finish its best quarter against the dollar in almost three years with the GBP/USD settling at 1.4020, down 0.0055 or -0.39%.

Canadian Dollar

The Canadian Dollar closed lower against its U.S. counterpart on Thursday after the domestic economy unexpectedly contracted at the start of the year. According to a government report, monthly GDP declined 0.1%. Traders were looking for an increase of 0.1%. The previous month was revised higher to 0.2%, this softened the selling pressure. A strong performance by the major U.S. stock indexes also helped limit losses.

The USD/CAD settled at 1.2885, down 0.0036 or -0.28%.