The dollar was again unable to push through the 1.3550 level against the Euro and weakened back to lows around 1.3640 after weaker than expected US data, close to the record dollar low seen in December 2004. The US currency also weakened to a two-year low on a trade-weighted basis with markets looking to challenge record Euro highs. The dollar remained under pressure in early Europe on Wednesday with lows around 1.3650.
The US data was weaker than expected with existing home sales falling by 8.4% in March to an annual rate of 6.12mn, the lowest reading since June 2003. There was a further rise in inventories which will cause concern, although prices held firm.
Consumer confidence weekend to 104.0 in April from 108.2 the previous month with the present conditions and expectations components both weakening.
The data overall will reinforce market concerns over US economic conditions and maintain fears that the housing-related difficulties will undermine the wider economy. Expectations of a third-quarter interest rate cut increased after the data and the lack of yield support will keep the dollar on the defensive. Confidence will also be damaged if there is a weak reading for durable goods orders as it would suggest that the manufacturing sector is still struggling.
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