USD Surges Post-CPI, Focus Shifts to ECB Rate Decision
GBP
GBP/USD has declined currently trading at 1.2561 (interbank) whilst GBP/EUR is at 1.1687 (interbank). This decline in GBP/USD is attributed to yesterday’s U.S. inflation report.
Today, a report from the UK housing market indicated continued strength last month, as prices stabilized and buyer demand improved. According to the latest RICS UK Residential Survey, buyer demand in March reached a net balance of 8, marking the most positive result since February 2022.
The BoE is expected to initiate interest rate reductions in June, given the steady slowdown in UK inflation over the past two months.
Additionally, projections of slower economic growth and relaxed labour market conditions heighten expectations for the BoE to move towards rate cuts sooner.
While data has been sparse this week in the UK, tomorrow's release of the UK's monthly Gross Domestic Product (GDP) and February Industrial Production will likely influence the pound's performance.
Today’s Events (GMT):
00:01 - RICS House Price Balance - Actual: -4% vs Forecast: -6%
09:30 - BOE Credit Conditions Survey
EUR
The euro has tumbled, with EUR/USD currently trading at 1.0750 (interbank).
Investors are closely monitoring the European Central Bank's (ECB) interest rate decision and subsequent press conference today.
The ECB has maintained steady interest rates since September but has hinted at potential cuts in the near future, awaiting further confirmation from wage indicators.
The Eurozone is experiencing its sixth consecutive quarter of economic stagnation, with the labour market showing signs of softening. In contrast, the U.S. economy continues to outperform, with a tight labour market and higher-than-expected inflation, raising concerns about sustained price growth.
Market observers interpret ECB policymakers' repeated references to a potential June cut in the 4% deposit rate as a clear indication of forthcoming action.
However, ECB President Christine Lagarde is expected to refrain from discussing post-June plans, as there is still no consensus on the extent and pace of interest rate adjustments.
Today’s Events (GMT):
11:00 - Eurogroup Meetings
13:15 - ECB Interest Rate Decision and Press Conference - Forecast: 4.50%
15:15 - ECB President Lagarde Speaks
USD
The dollar index, measuring the currency against a basket of major counterparts, is currently trading at 105.15. Yesterday, it rose by 1%, nearing a five-month high of 105.30.
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Yesterday's U.S. Consumer Price Index (CPI) surpassed expectations, with a 0.4% month-over-month (MoM) increase and a 3.5% year-over-year (YoY) rise. Core CPI data, excluding volatile food and energy prices, also exceeded forecasts, increasing by 0.4% MoM and 3.8% YoY.
Following the inflation data, traders adjusted their expectations for interest rate cuts this year and the timing of the Federal Reserve's easing cycle. The yield on 10-year Treasury notes eased by 2.4 basis points to 4.536% on Thursday, remaining near the five-month peak of 4.568% reached on Wednesday.
Additionally, minutes from the Fed's March meeting, released on Wednesday, revealed policymakers' concerns about recent inflation readings even before the latest report.
Traders are currently pricing in 43 basis points of cuts this year, significantly lower than the 75 basis points projected by the U.S. central bank. At the beginning of the year, traders had anticipated over 150 bps of cuts in 2024.
Today, the latest Producer Price Index (PPI) data and Jobless Claims data are scheduled for release. Both Williams and Bostic are also scheduled to speak.
Today’s Events (GMT):
13:30 - Core PPI (Mar) - Forecast: 0.2%
13:30 - Initial Jobless Claims - Forecast: 216K
13:30 - PPI (Mar) - Forecast: 0.3%????
13:45 - FOMC Member Williams Speaks?????????????????? ?????????? ?
17:00 - WASDE Report?????????? ?????????? ?
18:30 - FOMC Member Bostic Speaks
CAD
USD/CAD is currently trading at 1.3686 (interbank), reaching its highest level since November 2023.
Oil prices have slightly increased, amid ongoing tensions in the Middle East, which pose risks to oil supplies from this vital region. U.S. crude futures are up by 0.4% at $86.56 a barrel, while the Brent contract has climbed by 0.4% to $90.85 per barrel.
Yesterday, the Bank of Canada (BoC) kept its key interest rate at 5% for the sixth consecutive time since July, as announced during its April meeting.
BoC Governor Tiff Macklem stated during the press conference following the announcement that while recent progress in inflation is promising, he requires further evidence of sustained inflation before considering rate cuts.
Macklem also mentioned the possibility of an interest rate cut in June.
No significant events are scheduled for today
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