How Major Currencies Move vs US Dollar

FX Market: How Major Currencies Move vs US Dollar

The Euro strengthened past $1,077, the highest in one month, as investors reconsider expectations for interest rate cuts by key central banks.

The European Central Bank is projected to initiate rate cuts in their upcoming meeting on June 6 and market forecasts indicate a potential decrease of 70 basis points throughout the year.

In contrast, the Federal Reserve is not expected to make any changes until September, and even then, a rate cut is uncertain. The likelihood of a rate reduction in September was at 69% after initial jobless claims unexpectedly soared to 8-month highs.

Meanwhile, the Bank of England maintained interest rates in May as predicted, but hinted at a potential cut during the summer.

Also, Loonie, the Canadian dollar strengthened to over 1.37 per USD in May, after US initial jobless claims unexpectedly surged to 8-month highs, weakening the US dollar and suggesting a softening labor market, possibly prompting a Fed rate cut.

Meanwhile, Canadian business confidence reached a two-year high of 63 in April, exceeding expectations and signaling resilient private sector sentiment, which tempered arguments for a Bank of Canada rate cut.

However, April’s PMI indicated twelve months of manufacturing contraction, below the expected expansion at 50.2, challenging optimistic outlooks. Furthermore, the economy grew only 0.2% in February and is expected to have stagnated in March.

GBP/USD whipsawed on Thursday, falling to the day’s low 1.2446 after a dovishly interpreted BoE decision to hold rates steady, then rallying towards 1.25 after above-forecast US jobless claims, leaving sterling in a cautiously negative trend as traders await US and UK inflation reports in the next two weeks.

An unexpected increase in the number of MPC members voting for a rate cut — with Deputy Governor Dave Ramsden joining Swati Dhingra — produced the dovish impetus.

That heaped downward pressure on GBP/USD before the jobless claims brought the pound some relief, with traders now awaiting the US CPI report on May 15 and UK inflation data on May 22.

The dovish BoE hold initially lifted BoE June cut odds, as expressed on LSEG’s IRPR page, to near 60%, before falling back to 45%, which facilitated cable’s rise off session lows to 1.2500.

Considering the steady GBP/USD fall in the past week from Friday’s post-payrolls high at 1.2634, recent shorts may lighten positions ahead of the weekend.

However, any combination of CPI reports that hints at a widening of US-UK rate spreads is likely to reignite bearish GBP/USD tones, putting the April 22 2024 low at 1.2299 in focus.

EUR/USD remains well contained around 1.0750 with a plethora of massive option strike expiry helping to contain over recent and coming sessions.

The Australian dollar rebounded past the $0.66 mark, hovering close to the highest level since mid-January, lifted by a fresh retreat for the greenback as weak US labor data favored a more dovish outlook for the Federal Reserve.

The move offset pressure on the Aussie dollar after the Reserve Bank of Australia offered no explicit hawkish message following its latest rate hold, as expected by markets.

The Brazilian real weakened to 5.16 per USD, pulling back from a three-week high of 5.07 USD on May 3rd, as investors digested the Brazilian central bank’s recent interest rate decision.

In its May meeting, the BCB cut its key Selic rate by 25 basis points to 10.5%, in line with expectations.

This adjustment reflects global uncertainties and a domestic landscape characterized by robust economic activity and inflation expectations that are not firmly anchored.

Recent trade flows suggest that more option users are betting on USD/JPY edging back towards 160.00 over coming weeks and months, with a preference for RKO triggers to lean on the BoJ’s resolve to limit overall FX gains.

The rupee consolidated in a narrow range and settled for the day on a flat note, higher by 2 paise at 83.50 (provisional) against the US dollar on Thursday, on weak domestic markets and a strong American currency. Forex traders said massive foreign fund outflows dented investors’ sentiments. Forex traders said massive foreign fund outflows dented investors’ sentiments.

At the interbank foreign exchange market, the local unit traded in a narrow range. It opened at 83.49, and touched an intraday high of 83.44. The local unit finally settled for the day at 83.50 (provisional), higher by 2 paise over its previous close.

On Wednesday, the rupee remained range-bound and settled 1 paisa lower at 83.52 against the US dollar. On Wednesday, the rupee remained range-bound and settled 1 paisa lower at 83.52 against the US dollar. “The Indian rupee traded flat on weak domestic markets and a strong US dollar.

The overnight jump in crude oil prices also put pressure on the rupee. However, likely dollar inflows supported the rupee earlier in the day,” said Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was at 105.70, higher by 0.15 per cent, as the US dollar gained on hawkish Fedspeak and geopolitical tensions in the Middle East.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was at 105.70, higher by 0.15 per cent, as the US dollar gained on hawkish Fedspeak and geopolitical tensions in the Middle East. “We expect the rupee to trade with a slight negative bias amid strength in the US dollar and selling pressure by foreign investors.

However, mixed to positive Asian and European markets may support the rupee at lower levels. “Any intervention by RBI or bond related foreign inflows may support rupee at lower levels. Traders may take cues from weekly unemployment claims data from the US and speeches from Fed officials. USD-INR spot price is expected to trade in a range of Rs 83.30 to Rs 83.75,” Choudhary said.

“Any intervention by RBI or bond related foreign inflows may support rupee at lower levels. Traders may take cues from weekly unemployment claims data from the US and speeches from Fed officials. USD-INR spot price is expected to trade in a range of Rs 83.30 to Rs 83.75,” Choudhary said. Brent crude futures, the global oil benchmark, rose 0.57 per cent to USD 84.06 per barrel. On the domestic equity market, the 30-share BSE Sensex fell 1,062.22 points, or 1.45 per cent to close at 72,404.17 points.

The broader NSE Nifty settled 345.00 points or 1.55 per cent lower at 21,957.50 points. On the domestic equity market, the 30-share BSE Sensex fell 1,062.22 points, or 1.45 per cent to close at 72,404.17 points.

The broader NSE Nifty settled 345.00 points or 1.55 per cent lower at 21,957.50 points. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, as they offloaded shares worth Rs 6,669.10 crore, according to exchange data. UK Keeps Interest Rates Unchanged at 16-Year High