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Inflation eases in the US

Daily Currency Update

US data on Thursday showed that producer price index (PPI) inflations eased further in March. PPI month-on-month fell -0.5% and core PPI fell -0.1% over the same period. The data, which came a day after a drop in the consumer price index, increased the expectancy that the Federal Reserve will pause its recent rate hikes more impenitently. The markets are now pricing in one more rate hike by the Fed in May, followed by a pause in June.  The USD lost further ground against the GBP and EUR on the news, taking GBP/USD to fresh highs at 1.2545 and EUR/USD at 1.1075. Both these currency crosses have opened today above recent resistance levels of 1.2500 and 1.1000 respectively.

The US continues to dominate the headlines as we enter into the weekend, releasing retail sales figures at 1:30 pm and consumer sentiment data at 3 pm. However, the recent positive inflation data from the US and the growing expectancy of a rate hike halt will likely weigh on the USD through till Monday.

Key Movers

Now that EUR/USD has broken through 1.1000, the currency has seen 13%+ movement in the past 6 months. The currency pair was sitting below parity back in October 2022 and touched 0.9680 at the lows, but as global concerns ease that the US is getting control of inflationary concerns, enough for market participants to be discussing interest rate cuts before the end of the year, the safe haven USD is being sold for riskier assets like the AUD, EUR, and GBP. Similar gains have been seen for the GBP against the USD, swinging 12%+ over the same period from 1.1180 to 1.2545. As other central banks start to get their own inflationary concerns under control, it will be likely they will continue their gains against the US dollar.

Expected Ranges

  • GBP/USD: 12410 - 1.2540 ▲
  • GBP/EUR: 1.1260 - 1.1390 ▼
  • GBP/AUD: 1.8390 - 1.8620 ▼
  • EUR/USD: 1.0990 - 1.1120 ▲