The EUR got a boost this morning after core CPI numbers came in higher than expected, although the disinflation trend is still continuing. The currency was also helped with growth in the first quarter, exceeding expectations rising to 0.3% up from 0% in Q4, 2023. GBPEUR eased off recent highs as a result, and EURUSD had another attempt at resistance levels. Market pricing still suggests the ECB will cut in June, and then again in September. We saw a bid for USD in the afternoon after US labour costs accelerated more than expected, adding to the hawkish narrative from the Fed.
*Daily move - against G10 rates at 7:30am, 01.05.24
** Indicative rates - interbank rates at 7:30am, 01.05.24
Appetite for USD has continued this morning, with the currency up across the board going into job numbers and the Fed meeting this evening. Markets are anticipating a hawkish statement from Fed Chair Powell this evening, which could rule out the chance of any rate cut at all this year. Worth remembering that only at the start of the year, markets were pricing in around 150 bps worth of cuts. With much of Europe observing a bank holiday today there may be limited impact in markets on hawkish job numbers this afternoon, but the case for further USD strength could be seen depending on how hawkish Fed Powell is this evening.
Markets have priced out 1.25% worth of rate cuts over the course of this year, with data suggesting that the Fed's job is not done with combatting inflation. Markets are now pricing in only one 0.25% rate this year, taking the USD index up to the highest levels since November. A hawkish Fed tonight and further gains on the greenback could well be seen.
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