Home Daily Commentaries US dollar remains under pressure

US dollar remains under pressure

Daily Currency Update

The USD remains under pressure as the dollar index (DXY) dips below the 102.383 mark. Considering the recent financial instability caused by the collapse of two regional banks earlier this month has prompted investors to reassess their expectations for future monetary tightening by the Federal Reserve. A pause in interest rate hikes in May is now expected by money markets, with rate cuts expected to follow.

The US Bureau of Economic Analysis (BEA) revealed today that the GDP for the fourth quarter came in at 2.6%. This reading comes in shy of the market's expectation of 2.7% and shows a contraction in GDP growth, as the previous result was at 3.2%. Initial jobless claims for the week ending on March 25th rose by 7,000. Data published today by the US Department of Labor revealed 198,000 claims, this was up from the previous print of 191,000, and reading worse than the predicted 196,000 claims.

Key Movers

The EUR/USD pair soars above 1.09150 as the euro reaches a one-week high against the dollar. German inflation data is coming in higher than anticipated, while revised U.S. fourth-quarter economic growth figures are weaker than initially reported. Inflation in Germany eased to 7.4% in March from 8.7% the month prior, which is lower than the 7.2% that analysts predicted in a Wall Street Journal survey—lending support for further interest-rate increases by the European Central Bank.

Losses experienced by the greenback have allowed the pound to reach a multi-week high of 1.2380 against the dollar. Persistent selling of the US dollar, coupled with the improvement in risk sentiment, has led to positive pressure on the currency pair. Like its European counterpart, the pound is benefiting from central bank divergence as the US Federal Reserve seems to be less certain about its next step.

The Canadian dollar hit a one-month high against the U.S. dollar on Thursday as oil prices rose, and investors grew more optimistic that the worst of the banking crisis was over. Gains for the Canadian dollar were bolstered by the price of oil, one of Canada's major exports. US crude oil prices increased by 1% and traded near 73.71 a barrel. This has led to USD/CAD falling by more than 1.2% as it trades around the 1.3510 mark.  With decreasing demand for safe-haven assets and key commodities recovering, the Canadian dollar is likely to see more upside in the near term. Canadian GDP data is due to be released tomorrow and could provide details on the strength of the economy; an increase of 0.3% is expected by analysts.

Expected Ranges

  • EUR/USD: 1.0827 - 1.092 ▲
  • GBP/USD: 1.2297 - 1.2383 ▲
  • AUD/USD: 0.6665 - 0.6714 ▲
  • USD/CAD: 1.3528 - 1.3584 ▼