USD Gains ahead of IMF World Economic Outlook Update
The United States (U.S) dollar was firmer against its major trading partners early Tuesday, with the exception of the Canadian dollar ahead of updates on the world economic outlook.
The International Monetary Fund (IMF) is scheduled to release an update to its World Economic Outlook later today, the first since January prior to the invasion of Ukraine by Russia. Amidst hawkish pose and rising yields, Fed speakers will be closely watched this week before the observed quiet period begins on Saturday.
The minutes of the March 15-16 Federal Open Market Committee meeting released last week suggested to analysts the Fed could raise rates by 50 basis points at its May 3-4 meeting.
St. Louis Fed President James Bullard, a voter on the FOMC this year, said Monday evening his base case is for multiple 50-basis point rate increases to get the federal funds rate near 3.5% by the end of 2022, but would not rule out a 75-basis point increase at a meeting if it is necessary.
A quick summary of foreign exchange activity heading into Tuesday shows that USD-CAD fell to 1.2607 from 1.261 at the Monday US close and 1.2629 a day earlier. READ: Dollar Steadies Ahead of Fed. Chair Appearance
Canada housing starts are scheduled to be released, followed by Canada inflation data on Wednesday and retail sales data on Friday.
Following the 50-basis point rate increase last week, markets expect the Bank of Canada to tighten further, possibly by another 50-basis points, at its next meeting in early-June.
USD-JPY surged to 128.3649 from 126.9983 at the Monday US close and 126.5897 a day earlier, as the yield differential between the US and Japan continued to drive the pair higher.
Japanese industrial production surged in February based on revised data released overnight. The Japanese trade balance will be released on Wednesday and its consumer price index and manufacturing PMI on Friday.
Bank of Japan meets on April 27-28 and is expected to maintain its stance of low interest rates, which could drive the pair higher. EUR-USD ticked up slightly to 1.0791 from 1.0782 at the Monday US close but was down from 1.0806 at the same point a day earlier when most European markets were closed.
There are no European data scheduled for Tuesday. This week’s highlights include industrial production and the trade balance on Wednesday, consumer confidence on Thursday and manufacturing and services PMI on Friday.
The European Central Bank’s decision to maintain its policy stance at last week’s meeting puts it in contrast with other central banks that have begun their tightening cycles.
GBP-USD was virtually unchanged at 1.3011 from 1.3012 at the Monday US close and was down from 1.3034 a day earlier during the market holiday.
There are no UK data scheduled for release Tuesday. Retail sales scheduled for release Friday are the highlight of the UK data calendar this week. The Bank of England is expected to raise interest rates further at its May meeting. #USD Gains ahead of IMF World Economic Outlook Update
