Weak data weigh on dollar sentiment

The first quarter GDP was just 0.7% on quarter slowing from 2.1% growth in the last three months of 2016. Consumer prices highlighted softness in demand: core personal consumption expenditure index declined to 1.6% on year from 1.8% in February as it fell 0.1% on month in March. Personal spending was stagnant with no change while personal income rose only 0.2% after downwardly revised 0.3% growth in previous month. Durable goods orders slowed also rising just 0.7% from upwardly revised 2.3% in February, as did pending home sales which fell 0.8% in March. Expansion in manufacturing sector also slowed as ISM Manufacturing index declined to 54.8 in April from 57.2 in March. A reading at 50 indicates no change and a reading above 50 represents expansion. These soft data contradict strong labor market data with unemployment unusually low and consumer confidence unusually high. Investors reduced the dollar bullish bets for eleventh time in sixteen weeks. As is evident from the Sentiment table, sentiment improved for the euro and British Pound. And the Australian dollar remains the only major currency held net long against the US dollar .

The euro sentiment improved dramatically after the European Central Bank kept its policy unchanged and made only the mildest acknowledgment that growth prospects for euro-zone are improving. The net short euro position fell $2.6bn to $0.23bn. Investors increased the gross longs and cut shorts by 1587 and 17655 contracts respectively. The British Pound sentiment improved as the British economy grew 2.1% in the first quarter, accelerating from a 1.9% expansion in the previous period. The net short position in British Pound narrowed $0.7bn to $6.58bn as investors increased the gross longs and covered shorts by 231 and 9587 contracts respectively. The bearish Japanese yen sentiment moderated as the Bank of Japan made no change in monetary policy while it offered its most optimistic assessment of the economy in nine years, forecasting a pick-up in overseas demand will help sustain an export-driven recovery. The net short position in yen narrowed $0.40bn to $3.4bn. Investors cut both the gross longs and shorts by 11019 and 7405 contracts respectively.

The Canadian dollar sentiment continued to deteriorate as the retail sales declined in February, 0.6% from 2.3% growth the previous month. The net short Canadian dollar position widened $0.34bn to $3.48bn. Investors increased both the gross longs and shorts. The bullish Australian dollar sentiment was essentially unchanged as inflation rose 2.1% in first quarter over the same period a year ago. Net longs slipped by $2 million to $3.21bn. Investors cut both the gross longs and shorts. The sentiment toward the Swiss franc deteriorated as the net shorts widened by $53 million to $2.23bn. Investors cut the gross longs and shorts.