Dollar on stable ground to start the week
Monday 24 April, 2023
Daily Currency UpdateFollowing a decent recovery last week, the US dollar begins the week trading steadily at 101.550. Economic data is pointing towards an increased risk of a downturn, which in turn could lead to the Federal Reserve reducing interest rates. The upcoming Federal Open Market Committee (FOMC) meeting is anticipated to result in a 25 basis points increase in rates. However, the primary focus of the upcoming meeting is expected to be on the guidance for future actions. US data reports this week will be featuring home prices, new home sales, and consumer confidence all scheduled for release tomorrow. On Thursday, the first look at Q1 GDP is scheduled for release and Friday will showcase personal income and spending data.
Key MoversThe euro is holding onto slight daily gains above 1.10150 after a rebound during the European session. Although German IFO institute data showed mixed results, the EUR/USD pair remains stable as the USD faces difficulty gaining momentum prior to the release of important economic data this week. As indicated by a survey on Monday, business sentiment in Germany experienced a slight increase, contributing to the positive outlook for Europe's biggest economy, which is expected to have avoided a recession during the winter. Additionally, Pierre Wunsch, a policy maker in the European Central Bank (ECB) and the chief of Belgium's central bank made hawkish comments. Current expectations are for the ECB to increase rates by 0.25 basis points with a possibility of a 0.50 basis point hike.
The sterling remained relatively stable against the US dollar as it traded around 1.24480 near the 10-month peak reached earlier this month. This is due to markets anticipating that the Bank of England (BoE) will maintain its policy tightening to reduce inflation. According to last week’s data, the inflation rate in the UK was at 10.1% in March, making it the only country in Western Europe to experience inflation in double digits. The increased confidence led to a rise in expectations that the BoE will raise interest rates beyond previously anticipated levels. As a result, several banks have revised their predictions upwards for additional monetary policy.
The USD/CAD begins the week on a positive trajectory and is gradually reapproaching its monthly peak reached on Friday, trading just below 1.3550. The upward movement is being bolstered by a blend of supportive factors. Although the Organization of the Petroleum Exporting Countries (OPEC) supply cuts could potentially result in tighter supplies, crude oil prices are currently hovering near their monthly low at 78.440 a barrel due to worries about the impact of increasing borrowing costs on global economic growth and fuel demand. This will likely adversely affect the commodity linked Canadian dollar.
- EUR/USD: 1.097 - 1.1034 ▲
- GBP/USD: 1.2414 - 1.2469 ▲
- AUD/USD: 0.6668 - 0.6697 ▲
- USD/CAD: 1.3526 - 1.3565 ▼