U.S. Dollar Drops Ahead of Further Inflation Data
GBP
GBP/USD has risen and is presently trading at 1.2774 (interbank). GBP/EUR stands at 1.1750 (interbank).
The Pound has extended its gains as markets anticipate that the Bank of England (BoE) will maintain borrowing costs for a longer duration to curb inflation.
According to Citigroup strategist Jamie Searle, the upcoming UK election in July will further diminish the likelihood of an immediate BoE rate cut, reducing the risk of electoral interference with the BoE's policy cycle and emphasizing data-dependency.
Apart from a speech by Andrew Bailey on Thursday, the UK's upcoming week calendar lacks significant economic events, while investors keep an eye on U.S. and European data for potential market volatility.
No significant events are scheduled for today
EUR
EUR/USD has advanced and is currently trading at 1.0877 (interbank).
The currency pair climbed following stronger-than-anticipated preliminary Eurozone Purchasing Managers Index (PMI) data for May.
ECB policymaker Piero Cipollone suggested on Sunday that the timing is opportune for an interest rate cut in June, citing recent data trends. Furthermore, ECB President Christine Lagarde expressed confidence in controlling Eurozone inflation and hinted at a probable interest rate cut next month.
While the ECB is expected to announce an interest rate cut in its upcoming monetary policy meeting, uncertainty remains regarding the pace of monetary easing after the decision. ECB policymakers have refrained from committing to a predefined rate-cutting trajectory and prefer to remain data-dependent.
Today’s Events (GMT):
05:55 - ECB's Schnabel Speaks
USD
The U.S. dollar index, gauging the currency against a basket of peers, has declined and is currently at 104.45, nearing a critical support level at 104.40.
Friday saw an increase in US Durable Goods Orders by 0.7% MoM in April, surpassing the anticipated -0.8% and the downward revised 0.8% in March. Additionally, the University of Michigan Consumer Sentiment Index improved to 69.1 in May, exceeding the expected 67.5.
Despite steady short-dated U.S. rates, the dollar edged lower amid reduced cross-market volatility and growing investor risk appetite.
CME FedWatch tool data indicates a 53% probability of a Fed rate cut in September, down from 64% a week earlier.
This week, investors await the preliminary Q1 Gross Domestic Product (GDP) Annualized for the U.S., estimated to grow by 1.5% from the prior 1.6%. Additionally, the U.S. PCE price index data, due Friday, is expected to show mild inflation cooling while remaining above the Fed’s 2% target.
Today’s Events (GMT):
05:55 - FOMC Member Bowman Speaks
05:55 - FOMC Member Mester Speaks
14:00 - S&P/CS HPI Composite (Mar) - Forecast: 7.3%
14:55 - FOMC Member Kashkari Speaks
15:00 - CB Consumer Confidence (May) - Forecast: 96.0
18:05 - FOMC Member Daly Speaks
CAD
USD/CAD has slightly declined and is presently trading at 1.3600 (interbank).
Brent crude has dipped by 0.1% to $83.04 a barrel, while West Texas Intermediate crude (WTI) stabilized at $78.64 a barrel.
The Canadian Dollar is benefiting from positive market sentiment. However, its near-term outlook remains uncertain amid expectations of the Bank of Canada (BoC) initiating interest rate cuts from the June meeting onwards.
Eased concerns about persistent inflation in Canada, driven by weak consumer spending and a bleak economic outlook, have fueled expectations of rate cuts in June.
Today’s Events (GMT):
13:30 - RMPI (Apr) - Forecast: 3.1%
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