Dollar Rebounds Slightly Following Recent Selloff

GBP

GBP/USD is currently trading at 1.2450 (interbank) while GBP/EUR is trading at 1.1638 (interbank).

The Pound Sterling has surged following yesterday’s robust UK preliminary PMI report by S&P Global/CIPS.

April's Services PMI exceeded expectations, soaring to 54.9 from 53.1, while Manufacturing PMI unexpectedly dipped below the expansion threshold at 48.7, down from 50.3.

Despite the manufacturing downturn, new business volumes across sectors grew at the fastest rate since May 2023, with services leading. This positive consumer spending outlook might alleviate concerns about inflation, potentially delaying interest rate cuts by the Bank of England.

No significant events are scheduled for today

EUR

EUR/USD is currently trading at 1.0690 (interbank).

The Euro has gained strength on the back of the Services sector growth revealed in yesterday’s better-than-expected HCOB Eurozone Services PMI data for April.

This morning, the headline German IFO Business Climate Index for April surged to 89.4, significantly higher than the March reading of 87.9, surpassing market forecasts of 88.9.

Additionally, ECB governing council member and Bundesbank President Joachim Nagel expressed scepticism, noting, “Services inflation remains high, driven by continued strong wage growth,” casting doubt on the sustainability of falling inflation and precluding a commitment to a particular rate path.

Persistent momentum in services sector prices in Europe may have postponed the anticipated timing for the ECB to cut interest rates.

Today’s Events (GMT):

09:00 - German Ifo Business Climate Index (Apr) -Actual: 89.4 vs Forecast: 88.9

09:15 - ECB Supervisory Board Member Tuominen Speaks

14:15 - ECB McCaul Speaks

15:00 - ECB's Schnabel Speaks

USD

The dollar index, a gauge of the currency against a basket of other major currencies, is presently trading at 105.86, slipping below its recent peak. Nonetheless, it remains roughly 1.5% above its April trough of 104.1.

The U.S. dollar has declined, following yesterday's disappointing preliminary S&P Global PMIs. The composite index dropped to 50.9, signalling contraction in both the manufacturing and services sectors, with readings of 49.9 and 50.9 respectively.

Market reactions to the U.S. PMIs precede the release of first-quarter GDP growth figures. While analysts are attentive to potential foreign exchange shifts prompted by activity indicators, substantial alterations in Federal Reserve outlooks are more likely to hinge on inflation, employment data, or communications from the Fed.

The latest durable goods data is due shortly, but investors are primarily focused on tomorrow's GDP figures.

Today’s Events (GMT):

13:30 - Durable Goods Orders (Mar) - Forecast: 2.5%

13:30 - Core Durable Goods Orders (Mar) - Forecast: 0.3%

CAD

USD/CAD has attracted some buyers and rebounded to 1.3686 (interbank) following a two-week low reached yesterday.

Oil prices stabilised above $88 a barrel on Wednesday after yesterday's rally, with Brent crude dipping slightly by 0.27% to $88.18 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) saw a marginal decline of 0.4% to $83.03 a barrel.

Anticipations of a potential interest rate cut by the BoC in the summer along with declining inflation and slower economic growth are perceived as undermining the Canadian dollar.

The latest Retail Sales figures from Canada for February are due shortly. It's anticipated that they will recover to 0.1% from the previous month's -0.3%. Core Retail Sales Excluding Automobiles are expected to remain unchanged at 0.0% compared to January's 0.5%.

Today’s Events (GMT):

13:30 - Retail Sales (Feb) – Forecast: 0.1%

13:30 - Core Retail Sales (Feb) - Forecast: 0.0%

13:30 - Wholesale Sales – Previous: 0.0%

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