Dollar Index Hits 3-week Low Before Key U.S. Employment Data
GBP
GBP/USD is presently at 1.2530 (interbank), while GBP/EUR stands at 1.1692 (interbank).
The Pound has faced pressure due to a pessimistic assessment of the UK economy by the OECD.
The latest OECD update downgraded UK forecasts for this year and next, with GDP growth expected to be only 0.4% for 2024 and 1.0% in 2025. Despite a slight edge over Germany's forecast for 2024, the UK is projected to be at the bottom among G7 nations in 2025.
Additionally, the upcoming interest rate decision by the Bank of England (BoE) is anticipated next week. It's expected that the BoE will maintain the current interest rate at 5.25% for the sixth consecutive time, while market expectations suggest the first rate cut may occur in September. Market participants will closely observe indicators of inflation and hints about the timing of potential interest rate cuts from the BoE.
Today's agenda includes the latest readings of S&P Global Services and Composite PMI figures.
Today’s Events (GMT):
09:30 - S&P Global/CIPS UK Composite PMI (Apr) - Forecast: 54.0
09:30 - S&P Global/CIPS UK Services PMI (Apr) - Forecast: 54.9
EUR
EUR/USD is currently trading lower at the interbank level of 1.0882.
Manufacturing activity across the Eurozone further weakened in April due to declining demand, despite efforts by factories to lower prices. This has led to firms reducing their workforce once again.
The final euro zone manufacturing Purchasing Managers' Index (PMI) fell to 45.7 in April, below the growth threshold of 50 for the 22nd consecutive month. However, it slightly exceeded the preliminary estimate of 45.6.
Moreover, during a virtual lecture at Stanford University, ECB Chief Economist Philip Lane acknowledged that inflation has decreased more rapidly than initially anticipated by the ECB.
There is division among ECB policymakers regarding extending the rate-cut cycle to future policy meetings. Investors currently expect the ECB to implement three interest rate cuts this year.
Unemployment figures for the Eurozone will be released shortly.
Today’s Events (GMT):
10:00 - Unemployment Rate (Mar) - Forecast: 6.5%
USD
The dollar index, which measures the currency against a basket of other major currencies, is currently trading at 105.25 after reaching 105.06, its lowest level since mid-April.
The US dollar has retreated from nearly six-month highs following remarks by Fed Chair Jerome Powell confirming the central bank's bias towards easing, increasing the likelihood of a more pronounced dollar decline ahead.
Today's focus will be on Nonfarm Payrolls data, which is expected to show 243K net job additions in April, slightly down from the previous 12-month peak of 303K.
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With market speculation regarding when and how often the US Federal Reserve (Fed) will cut interest rates, investors are anticipating a slowdown in hiring to signal a downturn in the US economy, which continues to outpace most of the developed world.
Average Hourly Earnings in April are also forecast to remain steady at 0.3% MoM, with wage growth being a significant concern for inflationary pressures. Currently, rate markets are expecting the first quarter-point cut from the Fed to occur in September, with a 62% likelihood of at least a 25 basis point reduction according to the CME’s FedWatch Tool.
Today's agenda includes several key events such as the S&P Global Composite PMI, S&P Global Services PMI, and the ISM Non-Manufacturing PMI.
Today’s Events (GMT):
13:30 - Average Hourly Earnings (Apr) - Forecast: 4.0%
13:30 - Nonfarm Payrolls (Apr) - Forecast: 243K
13:30 - Unemployment Rate (Apr) - Forecast: 3.8%
14:45 - S&P Global Composite PMI (Apr) - Forecast: 50.9
14:45 - S&P Global Services PMI (Apr) - Forecast: 50.9
15:00 - ISM Non-Manufacturing PMI (Apr) - Forecast: 52.0
CAD
USD/CAD is currently trading at 1.3664 (interbank) in today’s trading session.
The Canadian dollar experienced fluctuations following the FOMC decision, ultimately consolidating its gains.
Governor Tiff Macklem’s testimony to the Senate Standing Committee on Banking, Commerce, and the Economy reiterated that key indicators of inflation have been moving in the right direction, with recent data indicating an uptick in economic growth. There is an expectation for inflation to continue approaching the Bank's 2% target within the year.
Oil prices are set to decline over 5% this week, with Brent Crude at $84.06 a barrel and West Texas Intermediate (WTI) at $78.88 a barrel, trading near their lowest levels in seven weeks after substantial losses.
Financial markets anticipate the Bank of Canada (BoC) to lower interest rates in June or July, given the significant easing of inflation in Canada.
There are no significant events scheduled for Canada today, and USD/CAD volatility is likely to be influenced by US employment data later in the day.
No significant events are scheduled for today
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