Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD gains for third day following Fed
The US dollar was higher on Friday, with the USD index reaching three-week highs, as markets continued to react to last week’s Federal Reserve decision.
The Fed kept interest rates on hold in the 4.25% to 4.50% range with markets now more concerned that an uptick in inflation means the US central bank might be less likely to cut interest rates.
The US dollar was stronger on Friday, its third consecutive gain, as it climbed from five-month lows.
The Aussie and kiwi both fell as the USD gains. The AUD/USD fell 0.5% while NZD/USD lost 0.4%.
In Asia, the USD gains were more moderate. The USD/SGD gained 0.1% while USD/CNH also climbed 0.1%,
US PMIs set to moderate from February highs
Tonight at 12.45am AEDT, US PMIs (purchasing manager indexes) will be released – the most up-to-date reading of the US economy.
After hitting a multi-year high in February, the preliminary S&P manufacturing PMI most likely decreased slightly in March.
Most recently, business activity dropped significantly, according to the NY Fed services survey. After an unexpected fall in February, the S&P services survey employment index most likely reverted to expansionary territory.
Financial markets will also be looking to other key PMI numbers, with Japanese, European and UK PMI number due over the next 24 hours.
The key focus for FX markets will be whether the recent gains in the euro and GBP can be maintained. Will PMI activity numbers reflect the outperformance in European FX? If not, the EUR/USD and GBP/USD might be vulnerable, although the euro and GBP might maintain recent gains versus APAC FX.
Focus on inflation and GDP this week
Later this week, the calendar is filled with critical inflation data in the final week of March. UK and Australia will release CPI figures on Wednesday. Tokyo CPI YoY data will follow on Friday.
These inflation prints will be closely watched by markets as they assess the trajectory of monetary policy normalization across major economies.
Multiple consumer-related indicators will provide insights into economic health, with US consumer confidence due Wednesday.
Later in the week, US Personal Spending data on Friday, coupled with PCE Core Index YoY and Core PCE Price Index MoM, will offer a comprehensive view of American consumer behaviour and inflationary pressures. PCE is a key focus of the Federal Reserve.
The week features several significant growth indicators across major economies. US will report its GDP on Thursday. Friday brings GDP data from multiple regions, including the UK and Canada.
These releases will help shape market expectations for economic performance heading into Q2.
Aussie, kiwi slip
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 – 29 March
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
