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USD inches higher as more optimistic data is expected

USD - United States Dollar

The US dollar bounced back up today after giving up three tenths of a percent yesterday following softer than anticipated manufacturing data and a correction in US 10-year treasury yields.

The reason for the US dollar’s resilience could have come from comments late last week from Robert Kaplan, president of the Dallas branch of the Federal Reserve. He said that the central bank should consider tapering off its asset purchasing program soon. This view differs from Federal Reserve Chairman Jerome Powell’s perspective, who reiterated that he is willing to allow the economy to heat up and for inflation to drive forward, before considering any measures to tighten monetary policy. Powell reiterated in comments yesterday that the US economy is indeed heading in the right direction, but that the jobs market remains weak, and employment is lagging.

Traders are eyeing more US economic data, including the weekly report on US crude oil supplies tomorrow and the non-farm payrolls report for April due on Friday.

Key Movers

The Eurozone slid into a double-dip recession in the first three months of this year as output dropped under the weight of lockdown measures to contain a resurgence of coronavirus infections throughout Europe. GDP fell 0.6% in Q1 which is its second dip after a 0.7% fall in the previous quarter. On the plus side, economists are expecting consumers to unleash a wave of pent-up spending once countries begin to ease lockdown measures.

Despite EU and British lawmakers formalizing the post-Brexit deal last week, which is a big step to ensuring free trade, France hasn’t eased its Brexit bias. France's challenge could cause some GBP volatility in the coming days.

The Bank of England’s latest monetary policy report is due this Thursday, with rates expected to hold steady in the same way the US Federal Reserve did last week. Sterling is expected to take some real direction from Thursday's meeting, but what direction that will be is yet to be deciphered.

Expected Ranges

EUR/USD: 1.200 - 1.206 ▼

GBP/USD: 1.384 - 1.391 ▲

AUD/USD: 0.768 - 0.776 ▼

USD/CAD: 1.226 - 1.234 ▲