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USD edges lower ahead of key economic reports

Tuesday, May 14, 2024

Today’s headlines

What’s happening: The US dollar moved lower on Monday on speculations of rate cuts by the Federal Reserve.

What happened: The greenback slipped against most major peers amid prospects of sticky inflation in the US.

However, the US dollar recorded gains versus one of the major currencies after moving lower last week.

Why it matters: The US dollar has outperformed major peers so far this year due to data showing strength in the US economy.

The US Federal Reserve is widely seen slashing interest rates by 25 basis points (bps) by September and announcing another rate cut in December. The US central bank has so far been unable to reduce its benchmark interest rates due to sticky inflation.

US consumer inflation expectations for the year ahead accelerated to 3.3% in April, from 3% in each of the prior four months.

Data released on Friday showed US consumer sentiment dipping to a six-month low in May. The University of Michigan’s flash reading on consumer sentiment fell to 67.4 in May, recording the weakest level since last November, versus a final reading of 77.2 in April.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped around 0.1% to 105.22 on Monday.

The EUR/USD forex pair gained more than 0.1% to 1.0790, while the GBP/USD forex pair climbed around 0.3% to 1.2558.

The US dollar gained versus the Japanese yen by around 0.3% to 156.22 on Monday, following a 3% decline earlier this month.

What to watch: Investors await the release of economic data on inflation rate, retail sales and industrial production from the US this week.

Producer prices in the US, which rose 2.1% year-over-year in March, are expected to accelerate to 2.2% in April. The annual inflation rate, which rose for a second consecutive month to 3.5% in March, is expected to ease to 3.4% in April.

Data on retail sales will be released on Wednesday, while the industrial production report is scheduled for release on Thursday. Retail sales grew by 0.7% in March and is expected to rise by 0.4% in April. Industrial production, which came in flat in March, is projected to grow 0.1% in April.

The markets today

European stocks will be in focus today ahead of the release of the economic sentiment index

Context: European stocks closed mixed on Monday, as investors assessed the European Central Bank’s monetary policy outlook.

Details: The ECB is projected to start lowering its benchmark interest rates in June, while the US Fed is expected to wait till September to cut rates. Investors widely expect the ECB to cut rates by around 70 basis points (bps) this year.

The STOXX Europe 600 Index rose 0.02% to close at 520.86 on Monday, with construction and materials stocks being among the worst performers in the session. Autos stocks bucked the trend to close higher by around 1.4%.

London’s FTSE 100 fell 0.22% to close at 8,414.99 on Monday, reversing a six-session uptrend and down 0.2% from Friday’s record high.

Germany’s DAX 40 lost 0.16% to 18,742.22, while France’s CAC 40 fell 0.12% to settle at 8,209.28 on Monday.

What to watch: Investors await the release of the ZEW economic sentiment index from the Eurozone today. Analysts expect the ZEW Indicator of economic sentiment to increase to 46.1 in May, from a reading of 43.9 in April.

Data on GDP growth rate, employment change and industrial production will be released on Wednesday. The Eurozone economy is expected to expand by 0.4% year-over-year in the first quarter, following 0.1% growth in the previous quarter. Industrial production, which contracted by 6.4% year-over-year in February, is projected to decline by 1.8% in March.

Other Markets: US trading indices closed mixed on Monday, with the Dow Jones index and S&P 500 down by 0.21% and 0.02%, respectively, and the Nasdaq 100 up by 0.21%.

The news shaping the markets

Russia said its air defence systems had destroyed 16 missiles and 31 drones launched by Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.


Japan’s producer prices rose by 0.9% year-over-year in April, in-line with market estimates. The country’s producer prices rising for the 39th straight month exerted pressure on the JPY/USD forex pair.


New Zealand’s electronic card transactions fell by 0.4% in April. This being the third consecutive month of decline sent the NZD/USD pair lower in forex trading this morning.


Germany’s current account surplus shrank to €27.6 billion in March, from €28.8 billion a month ago, exerting pressure on the EUR/USD forex pair.


South Korea’s import prices rose by 2.9% year-over-year in April, after a 0.5% decline in the earlier month, sending the KRW/USD pair lower in forex trading this morning.

What else to watch today

Germany’s consumer prices, ZEW Economic sentiment index and ZEW current conditions, Japan’s machine tool orders, UK’s unemployment rate, employment change, average weekly earnings, claimant count change and labour productivity, India’s wholesale prices, Spain’s consumer prices, South Africa’s unemployment rate, gold production, mining production and number of unemployed persons, US NFIB small business optimism index, Redbook index, consumer debt and API crude oil stock change, Central Bank of Brazil Copom meeting minutes, Canada’s new motor vehicle sales and wholesale sales, as well as Argentina’s inflation rate.


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