US Dollar Shaking And Moving

Pound Sterling taking backward steps against the US Dollar

The 'Cable' rate (Pound Sterling to US Dollar currency rate) has taken a tumble toward the $1.2550 region where market uncertainty and some strong data for the States has undermined the recent upward momentum of the Pound. Analysts point at resistance markers at the $1.2550 exchange rate and identify $1.2500 as the next target should this first resistance point be breached

A holiday in Europe kept financial markets shut, reducing liquidity and demand for major currencies. In the US, updates from the Institute for Supply Management (ISM) showed that business activity in the US expanded in March for the first time since September 2022, pointing at the economy's resilience. The Manufacturing Purchasing Managers' Index (PMI) reached 50.3, surpassing the consensus of 48.4 and improving upon February's 47.8.

Adding to that, the report highlighted an increase in the Prices Paid Index, which was its highest point since August 2022. Given the economy's better-than-expected performance, this resurgence in pricing pressures might hinder the Federal Reserve's inclination to soften its monetary policy.

No Major Data

The EUR has also felt the strength of the USD

The EUR has similarly retreated when facing the USD, and with the USD gaining momentum on market trepidation and some solid economic performance that will likely feed into all-important Federal Reserve decisions. However, investors may add to this some nervousness about upcoming German data production - notably, inflation.

Hawkish comments from European Central Bank (ECB) officials did not help the Euro. Austrian Central Bank Governor Robert Holzmann said on Sunday that the ECB could cut interest rates before the US Fed. When the ECB would pull the trigger “will depend largely on what wage and price developments look like by June,” Holzmann added.

Germany will release today the preliminary estimate of the March Harmonised Index of Consumer Prices (HICP), expected at 2.4% YoY, while the US will release February Factory Orders and JOLTS Job Openings for the same month.

Data: Germany Harmonised Index of Consumer Prices and CPI

Stocks down and Dollar up - plenty of Fedspeak on the wires today

The Dollar is on a charge, backed by consensus-beating US data that means the US Federal Reserve will likely cut interest rates after the Bank of England and European Central Bank. Adding to the 'risk sentiment' view, the S&P 500 carved off 30 points and the Dow Jones was down some 250 points. The rationale being that investors have removed funds from assets viewed as more risky and into safe-haven assets like the US Dollar.

The Pound to Dollar exchange rate fell to $1.2544, the lowest level since February, after the US ISM manufacturing PMI rose to 50.3 in March from 47.8 in February, comfortably beating expectations for a figure at 48.4.

The report also suggested that inflationary pressures facing US companies were increasing again, with the prices paid component of the report shooting higher to 55.8, exceeding estimates for 52.6. Market expectations for a June Federal Reserve rate cut declined following the data release, boosting US yields and the Dollar.

US Jolts job openings, Factory orders, Mester/Williams/Daly speak from Fed.