The United States Dollar continues yesterday’s skid into this morning, opening the session moderately lower against most currencies.
Overview
Yesterday’s inflation data and the release of minutes from the Federal Reserve’s March meeting painted a picture of a softening US economy, which is what the Fed needs to see to begin wrapping up its tightening cycle. Though relief at the current pace of disinflation abounds, markets are still pricing a 70% chance of one more rate hike at May’s meeting. In the minutes released from the March meeting yesterday afternoon, the Fed said it considered a pause in its hiking cycle and raised the possibility of a “mild recession” later this year.Earlier, the release of Producer Price Index (PPI) readings showed a relatively surprising contraction, falling half a percent month over month and posting a smaller annual gain than expected. A bit of a dovish surprise, this may provide more argument for the Fed to conclude its hiking cycle earlier. Energy prices, however, remain elevated, and concerns remain about the impact of OPEC+ supply cuts on the price of oil. Taken as a whole, the Fed’s data-driven approach was largely validated this week as multiple releases pointed to cooling inflation. Though one more rate hike is still likely, targets for the Fed’s rate at the end of the year are lowering and driving USD down.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇑
The single currency continued yesterday’s strength against the Buck and this morning hit its highest price in just over a year. The European Central Bank is looking toward its May meeting as well and multiple speakers from the monetary policy body have re-emphasized that they have further to go on rate hikes to tackle inflation throughout the region. A 50-point hike is not out of the question, and the ECB’s tightening cycle will likely last longer than that of the Federal Reserve.
CHF ⇑
The Swiss Franc continues to be the big winner of the G10 this week, hitting its strongest price against the Buck since February of 2021. Geopolitical tensions continue to drive the traditional safe haven currency – North Korea’s overnight missile launch prompted a flight to safety during Asian trading hours overnight. CHF has posted a gain of nearly 3 percent this week and, since its October lows, gains of almost 15 percent.
