In Wednesday’s currency market, the dollar is trading lower in Europe, though it remains close to its highest levels in over four months, as traders await updates on U.S. interest rates and future economic forecasts
This week’s market focus will culminate in the final days with the release of US employment data..
Despite weakening, the dollar may consolidate on Wednesday after a series of positive economic data led traders to scale back their expectations for an imminent interest rate cut by the U.S. Federal Reserve (Fed).
Traders now think the Fed will cut interest rates by about 75 basis points this 2024, in line with the U.S. central bank’s estimates, with the start of an easing cycle expected no earlier than July.
More economic data, including the ADP private employment report and the ISM service sector index, will be released today, although investors are likely to focus more on statements from a series of central bank speakers, including Fed Chairman Jerome Powell.
The Fed chairman said Friday that the most recent U.S. inflation data is “along the lines of what we would like,” statements that are largely in line with his comments following last month’s policy meeting, which had markets placing their bets on a June rate cut.
Earlier this week, the market favored long positions in the dollar amidst expectations of a rate hike.
Likewise, this week’s speeches by Fed members could be the new catalyzing event to generate gains for the dollar
The British pound and the euro are rising
In Europe, the EUR/USD is up 0.1% to 1.0773, recovering from recent lows not seen in over a month, ahead of the release of eurozone data.
The headline annual inflation figure for March is expected to slightly decrease to 2.5% from 2.6% the previous month, while core inflation, excluding volatile components, is anticipated to decrease to 3% from 3.1% last month.
Austria’s monetary policymaker Robert Holzmann said on Wednesday that the European Central Bank (ECB) could start cutting interest rates in June as inflation could fall faster than expected, although it should not get too far ahead of the US as this would result in not much of an easing impact.
GBP/USD rises slightly to the level of 1.2578, rebounding after losses in recent days
The Japanese yen stabilizes after recent losses
USD/JPY rises 0.1% to the 151.69 level and manages to stabilize after recovering some of its recent losses.
While dollar pressure and the view of higher US interest rates caused the yen to hit 34-year lows the previous week, it then regained some ground after Japanese officials signal a possible intervention in the foreign exchange market in order to support the yen.
USD/CNY points to a 0.1% gain to the 7.2358 level, despite not being comforted by the release of a private survey that noted that China’s services sector grew in March as estimated.
The pair is comfortably above the key 7.2 level, reflecting continued weak confidence in the yuan.
