Daily Market Update
April 30, 2024The EUR/USD ranged in the low 1.07’s overnight. The Federal Reserve begins its two-day monetary policy meeting on Tuesday, where it’s expected to hold rates at 5.25%-5.5%, while striking a hawkish message.
The Fed policy meeting could be a non-event for the euro/dollar as (Chair Jerome) Powell will not be as dovish as last time, but the market is already discounting such a backdrop by fully pricing just one rate cut in 2024.
Traders have recently pared back bets of Fed rate cuts this year amid hotter-than-expected U.S. economic data and stubborn inflation numbers.
A rate cut in September was looking like a close call at just 44%, according to CME Group’s FedWatch tool.
The dollar was down 0.02% to 105.67 against a basket of currencies ahead of the Fed’s meeting, after slipping 0.25% in the previous session.
“Fresh U.S. data has prompted our U.S. economist to push out his projection of the start of the Fed’s easing cycle to 2025 from December 2024,” said Thierry Wizman, global forex and rates strategist at Macquarie.
“We don’t rule out that the next change may be a hike, which would prompt a new wave of broad-based U.S. dollar strength.”
Other major central banks such as the European Central Bank (ECB) and the Bank of England (BoE) may begin to cut rates in the near future, even if the policy path is more uncertain after recent developments.
Euro zone inflation is on its way back to 2%, but the process is bound to be bumpy and geopolitical tensions pose an upside risk to price growth, ECB Vice President Luis de Guindos said late on Monday.
Data showed that the bloc’s economy rebounded in the first quarter from a mild recession as Germany returned to growth and expansion accelerated elsewhere, while inflation steadied.
The euro fell 0.1% to $1.0731.
The yen dropped against the dollar on Tuesday, giving up some of its sharp gains the previous day sparked by suspected intervention by Japanese authorities.
The currency was down 0.35% to 156.90 per dollar, but off its 34-year low of 160.245 hit on Monday when traders say yen buying intervention by Tokyo drove a eye-catching rebound of nearly six yen.
The offshore Chinese yuan slipped 0.1% to $7.2477 per dollar and has depreciated 2% against the dollar so far this year, despite support from the central bank.
In cryptocurrencies, bitcoin fell 2% to $63,707.00.
Source: Reuters
