Gentium FX | Daily Report - 3rd April 2023 - USD Sees Strength After OPEC+ Production Cut

GBP: Last week, Bank of England Governor Andrew Bailey stated that interest rates might need to be increased if there were indications of persistent inflationary pressures. Moreover, the final UK GDP figures released on Friday indicated that the economy grew by 0.1% in Q4 2022, thus avoiding a technical recession, which further reinforces the hawkish stance taken by the Bank of England. With a lack of significant UK data being released this week, the market will pay close attention to any comments from members of the Monetary Policy Committee about inflation and interest rates for volatility.

EUR: The Euro has seen some renewed weakness meaning that EUR/USD has failed to preserve its recent momentum on over the weekend. In the Economic Bulletin issued on Thursday, the European Central Bank restated that inflation in the Eurozone is expected to remain excessively high for an extended period with predictions of average inflation rate of 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025. Spanish manufacturing data released this morning came out higher than expected with employment and output levels being the highest levels in a year. In addition, average input costs fell for the first time since November 2019.

USD: For the second consecutive trading day, the Dollar is experiencing significant positive momentum, buoyed by predictions that an unexpected cut in production by OPEC+ will increase inflation rates, thereby necessitating the Federal Reserve to revert to its policy of combating inflation by hiking rates. On Sunday, oil producers announced a further cut in production of approximately 1.16 million barrels per day, causing a 6% increase in commodity prices ahead of the OPEC+ ministerial panel's virtual meeting. A slight increase in US Treasury bond yields is further pushing the market to predict that the Federal Reserve will look to tighten policy again.?

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