Currency news

USD index at 2024 high ahead of Fed meeting

Thanim Islam
Profile
Head of FX Analysis at Equals Money
-
3
min read
Publish date
01/05/24
  • Europe's growth bounces back
  • A hawkish Fed meeting tonight could see no rate cuts this year


Yesterday's currency recap

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.

Today's GBP rates

Currency pair Daily move* Indicative rate**
GBPAUD 0.80% 1.9287
GBPCAD 0.30% 1.7215
GBPCHF 0.36% 1.1480
GBPDKK -0.03% 8.7371
GBPEUR -0.03% 1.1714
GBPJPY 0.38% 197.1780
GBPNOK 0.45% 13.8659
GBPNZD 0.73% 2.1173
GBPSEK 0.20% 13.7527
GBPUSD -0.30% 1.2524


*Daily move - against G10 rates at 7:30am, 01.05.24

** Indicative rates - interbank rates at 7:30am, 01.05.24

Key data points

Currency Event Period Consensus Previous
GBP S&P Manufacturing PMI Apr 48.70 48.70
USD ADP Employment Change Apr 180,000 184,000
USD JOLTS Job Openings Mar 8,690,000 8,756,000
USD ISM Manufacturing Apr 50.00 50.30
USD ISM Prices Paid Apr 55.40 55.80
USD Fed Rate Decision May 5.50% 5.50%

Upcoming speeches

  • USD: Fed Chair Powell

What we think

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.

Chart of the day

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.

01052024 cotd
Source: Bloomberg Finance L.P.

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About the author
Thanim Islam
Profile
Head of FX Analysis at Equals Money

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