The Weekly Round-up

In what was initially anticipated to be a relatively quiet week, we have actually seen a considerable amount of movement. It was the US that was going to be taking centre stage with limited data for the Eurozone and UK. Considering that the US Dollar had made considerable gains before the Easter weekend, many expected the USD to take advantage of the lack of news elsewhere and consolidate the gains they made. This did not turn out to be the case with the Pound actually managing to gain back some of the heavy losses they endured over the previous week, with the GBP/USD currency at one point seeing around a 1.3% difference from the high to the low.

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The first major piece of news came in the form of ISM Manufacturing for the US on the European and UK bank holiday Monday. These results surprised on the upswing with initial forecasts expecting a result of 48.5; however, actual results came in at 50.3, a key result as it comes in above the 50 mark and indicates an expansion in the manufacturing industry. This saw the Pound suffer heavy losses and drop to its lowest level of the week.

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The next day saw normal practice return as the bank holidays came to an end. There was, however, limited data out with the main talking point being German prelim CPI m/m. This showed inflation m/m had remained unchanged at 0.4%, with initial forecasts saying that we would see a slight uptick to 0.5%. Wednesday was when we saw real movement though, with the USD suffering losses following the weaker-than-expected ISM Services data. Although it did remain above the key marker point of 50, it saw a considerable drop-off, coming in at 51.4 from 52.6 in the previous reading. Fed Chair Jerome Powell’s speech that evening did little to save the USD, and it continued to experience losses into Thursday. There is, however, an argument to be made that this swing in the market was caused mostly by traders who were capitalizing on the USD strength from the week before, and medium-term expectations still envisage a strong USD.

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Later today, we will see the US post their latest set of Non-farm employment data, a key reading for inflation and with recent other employment data coming in hot, we could see a late push from the USD this afternoon. Next week the key days will be Wednesday and Thursday. On Wednesday, the US will post the latest set of CPI data; this will give the Fed the latest insight into how far inflation has come off and will be closely watched for signals of rate cuts. The next day, the ECB will make the latest interest decision with again any indications of cuts to rates or a cut likely causing extreme volatility. In the short term, the theme continues, who will cut first?