The US dollar is certainly not in demand. The sell off of the greenback continues as the markets drop the currency on a minor miss of a minor indicator, or just sell it when possible.
EUR/USD reached a one month high and GBP/USD is on a recovery path once again. Both only temporarily dropped on weaker expected figures, only to resume the rises.
The US Empire State Manufacturing Index, which is not a first tier indicator, scored 4.5 points, less than 9.9 expected and lower than 12.5 last month. The TIC Long-Term Purchases number also missed with a negative flow of 45.9 billion, contrary to expectations of a positive flow of 28.9 billion.
These figures support EUR/USD which is now at 1.3755, after hitting a one month high of 1.3758. Earlier, the ZEW Economic Sentiment disappointed with a drop. The euro dropped a bit, but then rode higher.
GBP/USD was hit by lower than expected inflation numbers but is now on the rise again.
Why is this USD sell off happening?
So far, the bad weather was blamed for the weak US data, and it was considered a temporary effect that would not stop QE tapering.
However, as also the month of February had a rough snow storm, markets might begin thinking that:
- The effect of the bad weather is significant: It might not only be a temporary headwind but could seriously hurt the economy and the fragile recovery.
- The weakness is not solely weather related: The snow cannot be blamed for everything: the US economy is also suffering from lack of demand, a still austere government and perhaps global weakness.
On this background, QE tapering in March is not necessarily a done deal.
