US Dollar Steadies as Forex Traders Eye Data
US dollar steadied against major foreign currency and trading pairs on Tuesday as forex traders eye release of economic data in the United States and others. British pound was doing well earlier in the day but Euro came under pressure, losing weight as market anticipate policy easing.
USDJPY pair is showing no signs of weakness as it has been holding up near a steep 34-year high of around ¥152.00. Ever since the exchange rate knocked out the multi-year record, battered yen supporters have been on the lookout for a possible intervention by Japan officials.
But all Japan has been doing so far has been all bark and no bite.
The markets are tuning in to the latest updates from the US economy. Private job data is on deck for release later today and the big job report—nonfarm payrolls—is slated for Friday.
The expected reading is 189,000 new hires added in March. Anything above that would indicate the economy is still running hot. And anything below would suggest that the Federal Reserve is on the right track to lowering borrowing costs.
The Euro faced pressure below $1.08 as investors anticipated additional policy easing from the European Central Bank, contrasting with the Federal Reserve’s approach. In March, Euro Area inflation dropped to 2.4% year-on-year, below the expected 2.6%.
The core rate, excluding volatile food and energy prices, decreased to 2.9%, the lowest since February 2022 and below the forecasted 3.0%. German inflation hit 2.2%, the lowest since mid-2021, and French inflation reached a two-year low.
On the other hand, Italian and Spanish rates saw slight increases. In the US, the strong economy and tight job market tempered expectations of rate cuts for the year.
The USDEUR was little changed, wavering around 1.0771 in early European trading Wednesday ahead of key EU-wide inflation data. The March reading of Eurozone Consumer Price Index (CPI) is due from Eurostat today.
The forecast is for a 2.5% year-over-year increase against the previous 2.6%, Investing.com data compiled by Bloomberg showed.
Danske Bank expects euro area inflation for March to come in at 2.4%, just below the consensus, due to “recent downside surprises in the four biggest economies,” according to a note Wednesday morning.
“The likely decline in inflation is good news for the ECB but the sticky underlying service inflation and uncertainty regarding high wage growth means we only foresee the first rate cut in June.”
A reading that is stronger than forecast is generally supportive, or bullish, for the euro, while a weaker than forecast reading is generally negative, or bearish, for the euro. Cadbury Nigeria Loses N19.09bn in 2023
Chinese Yuan
The offshore yuan depreciated past the 7.26 per USD level, hovering close to the four-and-a-half-month low of 4.275 touched on March 22nd as pessimistic domestic sentiment countered PBoC efforts to prop up the local currency.
Persistent concerns over the health of the Chinese economy and pessimism over the likelihood of immediate traction were magnified by a strong greenback as the robust economic backdrop in the US limited the Fed’s urgency to cut interest rates.
The stark selling pressure for the yuan in on-shore markets outweighed the aggressive dollar sales from Chinese state banks, leaving yuan prices within pips of the lower limit of the PBoC’s daily fix.
This continued to mount pressure on the currency and challenged the central bank’s persistent efforts to set stronger-than-expected fixes, underscoring investors’ bets that the PBoC may be forced to weaken its grip on the yuan to support growth following limited responses to other stimulus measures and rate cuts.
