The U.S dollar (CURRENCY:USD) was unchanged in Friday early trading session as a cautious outlook gripped the market ahead of a meeting top finance officials in Italy. Traders also took a back seat awaiting the U.S retail sales report and consumer price index later in the day.
Finance ministers from seven of the world largest economies are in Italy for a round of meetings with top of the agenda expected to be trade protectionism.
Dollar Holds Flat
Against the Yen (JPYUSD), the greenback remained flat at $113.87 having retreated from highs of 114.32 in Thursday trading session. The dollar was also flat against the Australian dollar (AUDUSD) trading at 0.7375. Euro (EURUSD) was also flat at 1.0865.
The British Pound (GBPUSD) on the other hand remained under pressure on the Bank of England voting to keep rates on hold at 0.2%. The currency consequently fell to lows of 1.284 against the dollar on the Office for National Statistics reporting a 0.6% drop in manufacturing.
The dollar had been on an impressive run for the first three days of the week on renewed optimism that the fed was on course to hike interest rates at the net meeting in June. However renewed concerns about Donald Trump administration in the wake of the dramatic dismissal of FBI chief James Comey, appears to have spooked the market.
Investors remain concerned that sideshows in Washington could have a significant impact on the implementation of key economic policies that includes tax reforms and deregulation. While Comey dismissal appears to have been priced in, focus now shifts to key economic data that investors hope to use to analyze the health of the U.S economy.
Economic data has so far helped affirm confidence about the health of the U.S economy. The labor department says producer price index rose 0.5% in April above expectations. Initial jobless claims, on the other hand, dropped by 2,000 to 236,000 in the week ended May 6.
Fuelling expectations that the central bank would hike the benchmark rate is the fact that the number of Americans who filed for unemployment insurance hit a 28-year low. Should the decline in unemployment continue at this rate, then Boston Fed President, Eric Rosengren, believes the FED should move with speed and hike interest rates.
Nearly 80% of traders expect the FED to hike rates in June something that should continue to push the dollar higher against the other major currencies.