Tag Archives: USD

The market attitude was modest and cautious yesterday, compared with the previous day’s brighter atmosphere. Given the calm data schedule elsewhere, yesterday’s macro news flow centred on the US economy. 

US Federal Reserve members warned yesterday that, despite this week’s lower-than-expected US inflation report, interest rates may need to remain higher for longer. In contrast, Bank of England policymaker Greene stated that there is evidence that the UK employment market is becoming more balanced, implying that she is leaning towards supporting an interest rate drop.  

Looking ahead, today’s macro schedule is pretty calm as we approach the weekend. Today’s data schedule is quiet, with nothing noteworthy in the UK. In the Eurozone, the April CPI will be a second reading and is unlikely to be significantly different from the previous estimate.

This put annual inflation at 2.4%, unchanged from March and the joint lowest rate of the year. Meanwhile, the core rate dropped to 2.7%, down from 2.9% in March and the lowest level since early 2022.  

In the United States, the only notable release is the April update to the leading index. That statistic is intended to forecast future economic trends, including turning points in economic activity.

Investors attention will turn to US economic data figures as there is no UK or EU data to be released today.

In the States, the key releases today are housing starts, unemployment claims and industrial production. The total number of new residential buildings that began construction is set to show an expansion in April to 1.42 million.

Pound Sterling has rallied against the Dollar after the US CPI inflation reading yesterday. Annual core inflation slowed to 3.6 percent in April (from 3.8% in March) and general inflation dropped to 3.4 percent (from 3.5% in March).

This data suggests that inflation is heading towards the Fed’s target rate of 2 percent and has almost cancelled out the opportunity of raising interest rates. We have a number of Fed speakers this afternoon so their comments will be closely watched.

Jerome Powell has recently highlighted he expects the Fed to begin interest rate cuts in September, however the softer-than expected US inflation data has increased expectations for earlier rate cuts.

In the Eurozone, GDP rebounded in the first quarter of 2024 and showed an expansion of 0.3 percent from Q4 2023. This release is positive for the EU as it shows economic strength and indicates that consumer spending is on the rise.

Dollar Slips Against Euro and Sterling Ahead of Key US Inflation Data

The dollar continued to lose ground against the euro and sterling yesterday, as currency market dynamics shifted. Today’s focus is on a key data point that could shape the direction of the dollar: US CPI inflation for April.

Why US Inflation Data Matters

Today’s inflation figures are crucial because they will influence the Federal Reserve’s decisions on interest rates. The data from the coming months will play a big role in determining when the Fed might start reducing rates, making today’s release highly anticipated.

Dollar at Risk of Further Moves

The US inflation numbers present a two-way risk for the dollar. If inflation is higher than forecasted, it could give the dollar a boost. On the other hand, if the figures come in lower than expected, it may add more downward pressure on the currency.

Retail Sales in the Spotlight

In addition to the CPI data, today’s US retail sales figures for April also deserve attention. These numbers provide insight into consumer spending and can impact the market’s view of economic health, potentially influencing the dollar’s performance.

Key Data from Europe

Across the Atlantic, the spotlight is on a few important releases. The second reading of Eurozone Q1 GDP, Q1 employment figures, and March industrial production data are set to be published today. While these figures are important, they are unlikely to cause major movements in the euro unless there are unexpected results.

Stay tuned for today’s data releases, as they could bring new shifts in the currency markets.

The Bank of England’s May meeting was the centrepiece of Thursday’s macro diary. As expected, the central bank maintained the key interest rate at 5.25%. However, the BoE adopted a dovish stance. Indeed, Governor Bailey did not rule out a rate drop at the upcoming meeting on June 20th. 

He stated that by this meeting, the BoE would have two full sets of data, including two months’ worth of inflation figures. He also mentioned that the Bank of England may need to decrease interest rates more than markets are currently pricing in. Market rate expectations were not significantly influenced by Governor Bailey’s comments or the dovish tone of the meeting statement/minutes. 

Sterling had some early downward pressure following the BoE press conference, but this was short-lived. Instead, over the last 24 hours, the dollar has fallen modestly against both the euro and pound. The dollar suffered from a negative surprise in the weekly unemployment claims statistics. 

The UK remains in the spotlight today, with the early morning announcement of Q1 GDP. It revealed that the economy returned to growth in the quarter, expanding by a better-than-expected 0.6% quarter on quarter (vs. 0.4% forecast). The news has given sterling a boost in this morning’s FX session. Later today, the ECB meeting account and US consumer sentiment (May) are the important announcements to watch.