Home Daily Commentaries US dollar tumbles to a two-month low

US dollar tumbles to a two-month low

Daily Currency Update

USD tumbled to a 2-month low early in today’s trading session after US inflation data showed that the inflation slowed sharply in March, fueling speculations that the Federal Reserve’s rate hikes may have ended or may end in May. The sinking USD spiked the euro as it rose to its highest level of the year and traders believe the European Central Bank (ECB) has successfully combatted inflation. Data released on Wednesday showed the US Consumer Price Index (CPI) inflation came in at 5% year-over-year in March, down from 6% in February, which was below the market expectation of 5.2%. The US dollar declined after the data was published and plummeted even further today, aiding the Euro to rise to a 2-month high at the 1.1032 level. Initial jobless claims increased by 11,000 during the week ending on April 8, the highest since January 2022, rising to 239,000 against the market expectations of 232,000. This release further fueled the USD free fall. The US Producer Price Index (PPI) declined to 2.7% year-over-year in March from 4.9% the previous month, lifting hopes on disinflation is progressing smoothly.

Data from China showed that the trade surplus narrowed to $89.19 billion in March from $116.8 billion in February. This reading was better than the market expectations for a surplus of $39.2 billion. The dollar index (DXY) dropped to the 101.2 level, its lowest since February.

Key Movers

The sterling hit a 10-month high of $1.253 against USD. GBP was last up 0.2% at the $1.251 level, on the way to its third consecutive daily increase. UK’s manufacturing and GDP data showed no growth in February as strikes by public workers lowered output. UK Finance Minister, Jeremy Hunt, noted that the “economic outlook is looking brighter than expected and we are set to avoid recession thanks to steps we have taken.”

The euro recorded notable gains against the USD and continued to move higher in the early session today. The pair was last seen trading at its highest level since early February, just slightly above 1.1000. Industrial production data from the Eurozone showed an uptrend in February, indicating that the manufacturing sector recovery is holding ground. The Eurostat’s latest publication showed Eurozone’s industrial output rose by 1.5% month-over-month versus the expected 1.0% and the previous print of 0.7%.

After the Bank of Canada (BoC) left its policy rate unchanged at 4.5% yesterday, the USD/CAD pair closed its third straight day in negative territory and continues to push lower today. USD/CAD dropped to a nearly two-month low under the 1.34 level. The USD remained under persistent selling pressure for the third straight day amidst expectations that the Fed is almost done with its rate-hiking spree which turned out to be one of the key factors exerting pressure on USD/CAD. The Federal Open Market Committee’s (FOMC) March meeting minutes showed policymakers considering pausing interest rate increases after the failure of two regional banks, SVB and Silvergate. This, along with a largely positive outlook in the equity markets continued to weigh on the greenback, dragging the USD/CAD pair even lower. The upside in crude oil prices undermined the commodity-linked Loonie with West Texas Intermediate oil trading around 82.75 levels after the United States inflation data matched expectations.

Expected Ranges

  • EUR/USD: 1.0974 - 1.1065 ▲
  • GBP/USD: 1.2456 - 1.2533 ▲
  • AUD/USD: 0.6678 - 0.6766 ▲
  • USD/CAD: 1.3375 - 1.3472 ▼