Dollar Strengthens as Markets Reconsider Rate Cuts
GBP
GBP/USD has declined and is presently trading at 1.2468 (interbank). Likewise, GBP/EUR has also declined and is currently trading at 1.1612 (interbank).
Investors are poised to react to updates from the Bank of England, particularly the forthcoming UK GDP growth data.
The Bank of England is anticipated to maintain the Bank Rate at 5.25% for the sixth consecutive time.
Moreover, market participants will be attentively listening to Andrew Bailey's upcoming address for additional clues on future monetary strategies.
There is growing anticipation that the Bank of England may signal a potential rate decrease as early as next month, shortly after the expected ECB rate cut on June 6.
Today’s Events (GMT):
10:00 - Mortgage Rate (GBP) – Forecast: 7.92%
EUR
EUR/USD is trading 0.2% lower at 1.0740 (interbank).
Eurozone retail sales have recently shown their most substantial monthly increase since September 2022, indicating a positive shift in consumer spending dynamics.
This morning, German industrial output experienced a 0.4% decrease from February, a slighter decline than the anticipated 0.6%. Moreover, February's output was up by 1.7% month-on-month, slightly lower than the previously revised 2.1% increase.
Demand in the manufacturing sector remains subdued, as indicated by a 0.4% monthly drop in German industrial orders in March, adjusted for seasonal and calendar effects.
While the European Central Bank has hinted at a June rate cut, the future direction of its monetary policy remains uncertain.
Today’s Events (GMT):
07:00 - German Industrial Production (Mar) – Actual: -0.4% vs Forecast: -0.6%
08:00 - European Central Bank Non-monetary Policy Meeting
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USD
The dollar index, which measures the currency against a basket of other major currencies, is up by 0.2% at 105.500, moving up from last week’s approximate one-month low.
The dollar saw a modest uplift late yesterday following comments by Minneapolis Fed President Neel Kashkari, who noted that persistent inflation and a strong economy might lead the U.S. Federal Reserve to maintain current interest rates throughout the year.
Bond yields fluctuated, with the 10-year Treasury yield slightly decreasing to 4.46%, and the two-year yield inching up to 4.83%.
The trajectory of U.S. interest rates remains a focal point in the markets, particularly as no significant U.S. economic data is expected this week, placing greater emphasis on Fed officials' viewpoints.
Fed Chair Jay Powell recently indicated an end to further tightening, though the timing of any rate reductions remains unclear.
A series of talks by Fed officials is anticipated on Wednesday, including Vice Chair Philip Jefferson, Governor Lisa Cook, and Boston Fed President Susan Collins.
No significant events are scheduled for today
CAD
USD/CAD has surged is currently trading at 1.3756 (interbank) in today’s trading session.
Despite the Ivey Purchasing Managers Index in Canada exceeding expectations, the Canadian dollar struggled to strengthen.
Canada's Ivey PMI for April rose to 63.0 from 57.5, well above the anticipated 58.1, marking its highest point in two years and the ninth month of consecutive growth.
Oil prices declined amid increased U.S. inventories and optimism for a ceasefire in Gaza, with Brent crude dropping to $82.76 a barrel and West Texas Intermediate crude futures decreasing to $78.02 a barrel.
Market attention is now shifting towards Friday, with significant Canadian data releases anticipated.
No significant events are scheduled for today
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