17/05/2024
Written by: Ian Morley
Summary:
The EUR received a boost this morning following higher-than-expected core CPI figures, despite the ongoing disinflation trend. Additionally, first-quarter growth surpassed expectations, rising to 0.3% from 0% in Q4, 2023. Consequently, GBPEUR retreated from recent highs, while EURUSD made another attempt at resistance levels. Market indicators still suggest that the ECB will implement cuts in June and September. In the afternoon, there was a surge in demand for USD after US labour costs accelerated more than anticipated, reinforcing the hawkish stance from the Fed.
Speeches:
Market Insight:
The demand for USD has remained robust this morning, with the currency gaining ground ahead of job figures and the Fed meeting later today. Market participants anticipate a hawkish tone from Fed Chair Powell, which could eliminate the possibility of any rate cuts this year. It’s noteworthy that at the beginning of the year, markets were anticipating around 150 basis points worth of cuts. With much of Europe observing a bank holiday today, the impact on markets from hawkish job figures this afternoon might be limited. However, depending on Powell’s hawkishness tonight, there could be further strength in the USD.
Analysis:
Market sentiment has adjusted to reflect a reduction of 1.25% in expected rate cuts for this year, indicating that the Fed’s task of combating inflation is not complete. Currently, markets anticipate only one 0.25% rate cut this year, propelling the USD index to its highest levels since November. A hawkish stance from the Fed tonight could result in further appreciation of the greenback.