Currency news

Fed gives USD much needed support

Head of FX Analysis at Equals Money
-
3
min read
Publish date
13/06/24
    • Lower US CPI sees USD lose ground initially
    • Then USD gains following hawkish Fed


    Yesterday's currency recap

    US CPI numbers came in lower than expected, with year-on-year CPI at 3.3% vs 3.4%, and core CPI down to 3.4% in May from 3.6% in April. Markets are now pricing in two rate cuts by the Fed this year, and we saw a broad sell-off on USD as a result. GBPUSD climbed towards the highs seen in March this year, and EURUSD recovered the losses seen since last week's job numbers, and the fallout following the snap election being called in France.

    However, the USD weakness that we saw in the afternoon did not last following some surprising hawkish elements in last night's Fed meeting, and the dot plot. The Fed now forecast only 1 rate cut this year, down from 3 forecasted in March, with 4 Fed members seeing now cuts (up from 2 previously), 7 seeing 1 cut, and 8 seeing 2 cuts. Commenting on yesterday afternoons CPI number, Fed Powell said it's a step in the right direction but is only one reading. As a result, we saw the greenback recover most of the lost ground from the CPI number.

    Today's GBP rates

    Currency pair Daily move* Indicative rate**
    GBPAUD -0.64% 1.9162
    GBPCAD 0.30% 1.7582
    GBPCHF 0.04% 1.1440
    GBPDKK -0.24% 8.8268
    GBPEUR -0.24% 1.1834
    GBPJPY -0.09% 200.0040
    GBPNOK -1.00% 13.4881
    GBPNZD -0.44% 2.0642
    GBPSEK -0.96% 13.2300
    GBPUSD 0.76% 1.2837

    *Daily move - against G10 rates at 7:30am, 13.06.24

    ** Indicative rates - interbank rates at 7:30am, 13.06.24

    Key data points

    Currency Event Period Consensus Previous
    USD PPI MoM May 0.10% 0.50%
    USD PPI YoY May 2.50% 2.20%
    USD Core PPI MoM May 0.30% 0.50%
    USD Core PPI YoY May 2.50% 2.40%

    Upcoming speeches

    • None today.

    What we think

    Another set of inflation numbers today, with the PPI numbers from the US. A weaker number could well see GBPUSD and EURUSD have another attempt at yesterday's high, but in light of Fed speak last night and subsequent price action, any gains will be short lived. We still need to remember that the EUR will likely be under pressure due to the political uncertainty in France, and next week's UK CPI number and BoE meeting is likely to be a risk factor for markets wanting to push GBP much higher.

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

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