Key Movers

Recent upbeat data in Europe has led markets to assume that the ECB's first rate cut in 2024 will occur this June. With minimal economic data scheduled for release this week in Europe, market attention is likely to shift towards commentary from ECB officials regarding the pace and magnitude of interest rate cuts throughout 2024.

Speculation that the UK will initiate rate cuts before the Federal Reserve in America has been exerting pressure on the Pound this week. It is anticipated that the UK will embark on its rate-cutting cycle in August this year, amid an economy showing signs of stagnation and inflation data that, although declining, is not meeting the Monetary Policy Committee's desired pace.

In the US, markets are confident that the Federal Reserve will implement rate cuts but have adjusted their timeline to the third quarter of this year. Presently, a US rate cut is perceived as 82% likely to occur in August, with a total of 44 basis points of cuts already priced into the market for this year. Hawkish rhetoric from Fed officials has been providing support to the US Dollar throughout the week.

Key Movers

The US dollar outperformed through trade on Tuesday recovering losses suffered in the wake of the Federal Open Market Committee policy update and softer than anticipated Non-farm payroll print. The DXY dollar index jumped 0.4% on the day led by gains against the yen. Having forced the USD back below ¥152 on Friday last week the yen has been unable to maintain any momentum and now trades just below ¥155 at ¥154.70. After two rounds of Ministry of Finance intervention last week markets are now questioning whether officials can maintain yen support. With gains driven by a backdrop of higher yields and divergent central bank policies, the yen is fundamentally weak, yet markets remain jittery given the prospect of intervention and we are closely monitoring any outsized moves. With the GBP underperforming and the euro trading flat, our attention now turns to Thursday’s Bank of England policy update. We expect rates will be left on hold at 5.25% and are instead keenly focused on the commentary surrounding the meeting for any clues as to the timing and trajectory of future rate movements.

Key Movers

The US dollar outperformed through trade on Tuesday recovering losses suffered in the wake of the Federal Open Market Committee policy update and softer than anticipated Non-farm payroll print. The DXY dollar index jumped 0.4% on the day led by gains against the yen. Having forced the USD back below ¥152 on Friday last week the yen has been unable to maintain any momentum and now trades just below ¥155 at ¥154.70. After two rounds of Ministry of Finance intervention last week markets are now questioning whether officials can maintain yen support. With gains driven by a backdrop of higher yields and divergent central bank policies, the yen is fundamentally weak, yet markets remain jittery given the prospect of intervention and we are closely monitoring any outsized moves. With the GBP underperforming and the euro trading flat, our attention now turns to Thursday’s Bank of England policy update. We expect rates will be left on hold at 5.25% and are instead keenly focused on the commentary surrounding the meeting for any clues as to the timing and trajectory of future rate movements.

Key Movers

The US Dollar Index (DXY) was largely unchanged so far today with a slight 0.03% increase to trade near 105.09 this morning. The DXY seemed to remain stable with the only notable data release today coming in the form of an Economic Optimism survey from RealClearMetrics (RCM) and TechnoMetrica Institute of Policy and Politics (TIPP). The Economic Optimism index surveys consumers, asking them to rate the relative level of economic conditions. The results came in lower than expected at 41.8 versus 44.1. While this data did not have a large impact on the US dollar, it showed some depleting confidence in economic health in the US. The USD was up slightly versus the CAD, GBP, and AUD this morning.

In the Eurozone, the French Trade Balance came in lower than expected at -5.5 billion versus the expected -5 billion. Despite this data, the EUR was up slightly against the GBP, CAD, and USD so far this morning.

The GBP Construction PMI, which asks construction purchasing managers to rate the relative level of business conditions, was released with higher-than-expected numbers at 53 versus the expected 50.4. These higher numbers signalled growth in the construction sector and could help increase the strength of the GBP.

Last night the Reserve Bank of Australia (RBA) decided to hold rates at 4.35%. This decision came shortly after the AUD hit USD $0.66, a significant threshold for the pair. The AUD/USD pair fell after the announcement but seemed to be climbing back to the 0.66192 range this morning.

Key Movers

In the Eurozone, the French Trade Balance came in lower than expected at -5.5 billion versus the expected -5 billion. Despite this data, the EUR was up slightly against the GBP, CAD, and USD so far this morning.

The GBP Construction Purchasing Manager’s Index (PMI), which asks construction purchasing managers to rate the relative level of business conditions, was released with higher-than-expected numbers at 53 versus the expected 50.4. These higher numbers signaled growth in the construction sector and could help increase the strength of the GBP.

Last night the Reserve Bank of Australia (RBA) decided to hold rates at 4.35%. This decision came shortly after the AUD hit USD $0.66, a significant threshold for the pair. The AUD/USD pair fell after the announcement but seemed to be climbing back to the 0.66192 range this morning.

The Canadian dollar dipped slightly this morning against most major currencies as oil fell. West Texas Intermediate (WTI) oil was down around 0.7% to the 77.93 level this morning. Oil looked to have affected the Loonie as it struggled against the USD, EUR, GBP, and AUD so far today despite positive Ivey Purchasing Manager’s Index (PMI) data. Ivey PMI numbers came in higher than expected at 63 versus 58.1.

Key Movers

Today in Germany, factory orders fell by 0.4%, contrary to market expectations of a 0.5% increase. This unexpected decline has temporarily restrained the Euro's upward momentum. Additionally, Eurostat is releasing retail sales data for Europe today, with market forecasts anticipating a softer figure. Such a result could halt the recent gains seen in the single currency.

On Thursday, the Bank of England will announce its interest rate policy. While no changes are anticipated, market attention will be on the committee's voting pattern to gauge if any of the nine members express more dovish sentiments. Furthermore, UK GDP data is scheduled for release this Friday, with market expectations leaning towards a slight uptick to 0.4%.

The recent release of softer economic indicators in the US has reignited market speculation about potential interest rate cuts by the Federal Reserve this year. Later this week, Federal Reserve members John Williams and Thomas Barkin are scheduled to speak, likely setting the tone for future interest rate policy.

Key Movers

The USD edged higher through trade on Monday, up 0.1% for the day, recovering losses suffered in the wake of last week's softer-than-expected ISM services and non-farm payroll prints. That said gains have been driven by JPY losses and half a per cent rally in USD/JPY, amid speculation yen gains won last week following two rounds of intervention can be maintained.

The gap between US and Japanese rates is unchanged and the cost for the BoJ and Ministry of Finance will become increasingly expensive. Against a positive risk backdrop, the AUD and NZD are up, while the euro pushed above 1.0750 and the GBP consolidated a break back above 1.25. Our attention turns now to the RBA policy update today ahead of the Bank of England policy meeting on Thursday as key markers guiding direction through a week that is otherwise absent of headline data points.

Key Movers

The USD edged higher through trade on Monday, up 0.1% for the day, recovering losses suffered in the wake of last week's softer-than-expected ISM services and non-farm payroll prints. That said gains have been driven by JPY losses and half a per cent rally in USD/JPY, amid speculation yen gains won last week following two rounds of intervention can be maintained.

The gap between US and Japanese rates is unchanged and the cost for the BoJ and Ministry of Finance will become increasingly expensive. Against a positive risk backdrop, the AUD and NZD are up, while the euro pushed above 1.0750 and the GBP consolidated a break back above 1.25. Our attentions turn now to the RBA policy update today ahead of the Bank of England policy meeting on Thursday as key markers guiding direction through a week that is otherwise absent of headline data points.

Key Movers

The US Dollar Index (DXY) was down 0.08% this morning to trade near 104.999. The slightly softer USD today came after the jobs report on Friday boosted expectations for multiple Federal Reserve rate cuts yet this year. There is no data set to be released for the US today.

The EUR was up slightly against the USD this morning largely attributed to the soft USD performance so far today. The Eurozone released a variety of data including the Spanish unemployment change which came in at -60.5. This was worse than the forecasted -74.5. Additionally, French Final Services Purchasing Manager’s Index (PMI) came out above the expected 50.0 level at 51.3. German Final Services PMI came in just below the forecast for 53.3 at 53.2. The overall Eurozone Final Services PMI was above forecasts at 53.3. The EUR Sentix Investor Confidence Index, which rates the relative six-month economic outlook for the Eurozone, was released better than expected at -3.6 versus -4.8. The Eurozone’s monthly Producer Price Index (PPI) came in at -0.4, in line with forecasts.