US dollar stumbles in upbeat trade

The US dollar weakened on Monday as a positive risk tone limited demand for the safe-haven currency.

Meanwhile, Sterling sentiment is subdued so far this morning, with GBP/EUR retreating to €1.1486 and GBP/USD dipping to $1.2504. GBP/CAD and GBP/NZD have fallen to CA$1.6834 and NZ$2.0006, respectively, while GBP/AUD is flat at AU$1.8702.

Looking ahead, will a rebound in US retail sales help to bolster the US dollar later today?

What’s been happening?

The US dollar got off to a poor start this week, with the safe-haven currency faltering as a risk-on mood prevailed.

Reinforcing the USD selling bias was the latest Empire State manufacturing index, which fell to a five-month low this month.

The drop in the US dollar even came despite comments from Federal Reserve policymaker Raphael Bostic, in which he claimed the Fed is more likely to raise interest rates again than cut them this year.

The euro also weakened on Monday. The single currency coming under pressure after data showed a larger-than-expected contraction in Eurozone industrial production in March.

Meanwhile, the pound trended broadly higher through yesterday’s European session, amid an improving economic outlook for the UK.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest jobs report.

The release showed that unemployment unexpectedly ticked up to a 14-month high of 3.9% in March.

Coupled with below forecast wage growth, this dampened hopes for future Bank of England (BoE) interest rate hikes and is weighing on the pound this morning.

The focus for EUR investors this morning will be on Germany’s latest ZEW surveys. If May’s release reports a sharp deterioration in economic sentiment in the Eurozone’s largest economy, as is expected, the euro could tumble.

The Eurozone will also publish its latest Q1 GDP figures, but barring a divergence from the preliminary figures they may have limited impact on EUR exchange rates.

Across the Atlantic, the latest US retail sales figures could revive USD demand amid forecasts for a sharp rebound in sales growth last month. Although US debt-ceiling talks could overshadow the release.