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Last Friday’s rebound of the US dollar proved very short-lived as the currency lost ground again on Monday.

With no US-centric news to guide the forex market, corporate earnings came into bigger focus. Worse-than-expected first-quarter earnings from Bank of America (BAC), the second-largest US bank, played a part in weighing on the US dollar and also caused US stocks to decline Monday. Bank of America announced that its first-quarter net income fell 77% to $1.21 billion from $5.26 billion a year earlier, and earnings per share fell to 23 cents from $1.16, less than analysts’ estimates.

EUR/USD erased its losses from Friday, climbing to a session high of 1.5950, and is once again an arm’s length away from its record high of 1.5980, reached last Thursday. However, the US dollar gained against the British pound after GBP/USD tried unsuccessfully to hold onto its gains above the crucial 2.0000 level, and the pair fell to the low end of 1.9800. Although the Bank of England said it plans to swap 50 billion pounds of government bonds for mortgage-backed securities, that amount is just a drop in the water in relation to the 1.2 trillion pound mortgage market.

IMF Nags Again

The International Monetary Fund repeated Monday that the ECB “can afford some easing of the policy stance,” a remark which it made earlier this month in its World Economic Outlook. IMF’s European department director Michael Deppler, said, “While now isn’t the time to do so, if inflation expectations remain well-anchored, there is no sign of second-round effects, and the economic slowdown is confirmed, we see room for policy easing.” The ECB is likely to ignore IMF’s calls for now, seeing that Eurozone inflation rose to 3.6% in March and that oil prices are still going higher.

Canada Rate Decision

The Bank of Canada will announce its rate decision on Tuesday, and some volatility is expected in CAD-paired currency pairs. Most market participants are expecting the BOC to cut the rate by 50 basis points to 3%, after last week’s soft inflation data showed that the central bank could afford a bit of a leeway. Even with a possible rate cut in the shadow, the Loonie has been holding on quite well versus the US dollar due to rising oil prices. Last week saw a series of all-time highs in oil prices, which helps the Loonie. Watch out for the BOC statement tomorrrow. USD/CAD is now trading around 1.0050.

Tuesday:

Swiss trade balance 0615 GMT

Bank of Canada rate decision 0615 GMT (rate expected to be cut from 3.5% to 3%)

US existing home sales 1400 GMT

Japan merchandise trade balance 2350 GMT

Source: Dollar Falls Against Euro; Bank of America Earnings Hurt