17/05/2024
US dollar update
Summary
The US Dollar Index experienced mild gains, reaching 104.50 on Thursday after rebounding from a multi-week low of 103.95. This movement followed a sharp decline on Wednesday, largely influenced by softer-than-expected inflation data and signs of an economic slowdown. In April, the Consumer Price Index (CPI) showed a monthly increase of 0.3%, slightly below the anticipated 0.4%. Annually, prices rose by 3.4%, marginally down from 3.5% in March. Core CPI, which excludes food and energy prices, also rose by 0.3% monthly and 3.6% annually, indicating persistent inflation pressures. Inflation remains significantly above the Federal Reserve’s 2% target. Producer prices, which often precede consumer inflation, increased by 0.5% in April, with final demand for services and goods contributing to this rise.
Today, the Dollar Index is moving around 104.50, marking its second consecutive day of gains, although it was set to decline for the week. While consumer inflation aligned with expectations, retail sales stagnated, and mixed results were observed in other economic indicators such as jobless claims, import/export prices, housing starts, building permits, and industrial production. Traders are closely monitoring speeches from key Fed officials, including Neel Kashkari, Christofer Waller, and Mary Daly, seeking more definitive signals on future monetary policy. The Fed remains cautious, with officials advocating for careful consideration before implementing any rate cuts. This cautious stance reflects the Fed’s ongoing assessment of economic conditions and inflation trends, as they strive to balance growth and stability in an uncertain economic environment.
Market Views & Opinions
ING in today’s article “FX Daily: Calm waters ahead” says about the USD:
“Our view for the near term remains that we could see a further stabilisation in USD crosses as markets await the next key data input: April core PCE on 31 May. Cross-asset volatility may stay capped in the next couple of weeks and encourage more search for carry. This is why we are not very optimistic on a further recovery of the yen, which remains the most attractive funding currency. Our rates team, incidentally, continues to warn that US Treasury yields are facing upside risks in the near term.”
CIBC Capital Markets in today’s Economic Flash says:
“Taking a step back, and taking off one’s data-dependent hat, the forward-looking picture of economy and inflation still seems constructive for monetary policy easing to guide a soft landing. Wage pressures are softening as the supply of workers remains strong, consumer spending is shifting in a slightly lower gear it seems, interest-sensitive sectors remain weak and a range of different underlying metrics of inflation suggest most of higher inflation is either due to categories where prices are “sticky” (adjusted infrequently) or have a weaker associated with slack. Recency bias is preventing the FOMC from trusting their macro instincts and fully looking-through somewhat higher inflation, but in an economy that is not very interest-rate sensitive, they still have time on their sides.”
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The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
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