Global FX Market Summary: USD, ECB, Gold, Oil  April 12 ,2024

Soaring US Dollar: A Multi-Faceted Force

The US Dollar is currently experiencing significant strength. This trend is fueled by a confluence of factors:

• Diverging Central Bank Policies:The Federal Reserve is taking a more cautious approach to rate cuts compared to the European Central Bank, which is signaling cuts in June. This policy divergence strengthens the USD relative to the Euro (EUR) as investors seek higher returns in the US.
• Robust US Economy:Recent economic data paints a picture of a strong US economy. Positive GDP readings and upbeat factory data suggest continued growth, further bolstering the USD’s appeal.
• Safe-Haven Status:Geopolitical tensions remain a concern, particularly in the Middle East. This volatility drives investors towards safe-haven assets like the USD, pushing its price higher.

ECB Rate Cuts Loom Large

The European Central Bank’s (ECB) dovish stance is a significant factor influencing currency markets. The expectation of rate cuts in June weakens the Euro (EUR) for several reasons:

• Lower Returns:Lower interest rates in the Eurozone make EUR-denominated assets less attractive to investors seeking higher returns. This encourages them to convert their Euros into USD for potentially better returns.
• Weaker Eurozone Economy:The ECB’s dovish stance often reflects a weaker economic outlook in the Eurozone. This perception can further weaken the Euro compared to the perceived strength of the US Dollar.

The Geopolitical Impact: Oil and Gold Prices

Rising geopolitical tensions, particularly in the Middle East, are having a two-fold impact on global markets:

• Oil Prices:The potential for supply disruptions due to geopolitical instability can push oil prices higher. Higher oil prices can have a ripple effect on inflation and economic growth, impacting global markets.
• Gold Prices:Geopolitical uncertainty often increases demand for safe-haven assets like gold. As investors seek protection from market volatility, they may turn to gold, driving its price upwards.

 

High Probability Economic Events:

Tuesday, April 15, 2024:

• Retail Sales (MoM) (USD): Scheduled for 12:30 PM EDT, this report looks at the monthly change in US retail sales, a key indicator of consumer spending.
• Retail Sales Control Group (USD) & Retail Sales ex Autos (MoM) (USD): These are released alongside the headline Retail Sales data at 12:30 PM EDT, providing alternative measures of US consumer spending.

Wednesday, April 16, 2024:

• Gross Domestic Product (QoQ) (CNY) & Gross Domestic Product (YoY) (CNY): Scheduled for 2:00 AM EDT, these reports look at the change in the value of all final goods and services produced in China (GDP) over the prior quarter (QoQ) and year (YoY).
• Industrial Production (YoY) (CNY) & Retail Sales (YoY) (CNY): Released at 2:00 AM EDT, these reports measure the annual change in China’s industrial output and retail sales, respectively.
• BoE’s Governor Bailey speech (GBP): Governor Bailey is scheduled to speak at 4:00 PM EDT, providing insights into the Bank of England’s monetary policy stance and their views on the UK economy.

Thursday, April 17, 2024:

• Consumer Price Index (MoM & YoY) (GBP) & Core Consumer Price Index (YoY) (GBP): Released at 3:00 AM EDT, these reports measure the monthly and annual change in inflation for the UK. The core CPI excludes volatile food and energy prices.
• BoE’s Governor Bailey speech (GBP): Governor Bailey delivers another speech at 6:00 PM EDT.
• Fed’s Beige Book (USD): Scheduled for 5:00 PM EDT, this report summarizes economic conditions across the US based on anecdotal information from Federal Reserve Districts.

Friday, April 18, 2024:

• Employment Change (s.a.) & Unemployment Rate (s.a.) (AUD): Scheduled for 5:30 AM EDT, these reports look at the change in employment and the unemployment rate in Australia.
• Initial Jobless Claims (USD): This report on US unemployment claims is released at 12:30 PM EDT.
• Philadelphia Fed Manufacturing Survey (USD): Scheduled for 12:30 PM EDT, this survey measures the sentiment of manufacturing businesses in the Philadelphia region.
• Existing Home Sales Change (MoM) (USD): This report on the monthly change in existing home sales in the US is released at 2:30 PM EDT.
• National Consumer Price Index (YoY) (JPY): Released at 10:30 PM EDT, this report measures the annual change in inflation for Japan.

 

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