The U.S. Dollar is trading in tight ranges, with the last two sessions establishing a break from advancement after the currency reached fresh new highs overall since November.
Overview
Thus far in 2024, the Buck has climbed by 4.0% in value, a matter of worry for financial authorities around the world. In a rare instance, as noted by our own Helen Given, U.S. Treasury Secretary Janet Yellen released a joint statement with financial ministers from Japan and South Korea, noting “serious concerns” about the depreciation of the Korean Won and the 34-year low for the Japanese Yen.
As it looks like the U.S. is willing to see FX intervention of some kind, Buck is likely to face some losses. By now, it is clear to traders that the Fed will be taking its time before taking on any “dovish” policy measures and is pricing in just two interest-rate hikes for what is left of the year. Perhaps the Buck has reached a plateau when it comes to strengthening based on central bank speculation, but now growth will be the focus for how it is sustained here and making an appearance elsewhere. Without much in terms of data points, we will wait for geopolitical headlines as well as any surprises in statements from Fed members for the rest of the week.
What to Watch Today…
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EUR ⇑
The Euro is on a slow path of recovery, but it has hit the brakes on losing ground to the Buck after some return to calm in equity markets. The start of the week looked bad as risk-aversion took hold of markets surprised at the attack by Iran but, by now, already looking mostly past it. The repercussions are still yet to be defined, with Israel taking calls from all leaders who want to see some de-escalation and diplomatic efforts to avoid an all-out conflict in the region. Additionally, there has been some growing confidence in the German economy, which is now in full gear to help with Ukraine’s defense resources. The shared currency could start making up for what it has lost.
GBP ⇑
Sterling has not been a major mover, but it is important to note statements from Bank of England Governor Andrew Bailey regarding inflation. After facing the worst food price increases in decades and coping with trade issues developing from conflict, Bailey explained that inflationary growth is not as big a concern in the U.K. as in the U.S. As far as officials are concerned, disinflation has been satisfying and could signal the environment appropriate enough to start cutting into borrowing costs. We shall see if the BOE makes a move at their next meeting on May 9th. Per discussions, supply shocks are fading in a similar fashion to how they are perceived by the European Central Bank.
