USD demand picked up on Friday afternoon following the core PCE inflation numbers coming in higher than expected at 2.8% versus 2.7% expected. As a result, GBPUSD and EURUSD failed to move through key resistance levels and the markets caused a decline on pairs. Looking at the charts, technical indicators suggest further declines could be seen on both pairs especially going into this week, where we have a flurry of data points stateside.
*Daily move - against G10 rates at 7:30am, 29.04.24
** Indicative rates - interbank rates at 7:30am, 29.04.24
The spotlight will be on the greenback this week with a flurry of job numbers as well as the Fed policy meeting on Wednesday evening. Whilst no changes are expected in the Fed's rate, further hawkish comments from the Fed and strong job numbers could well erase the possibility of any rate cuts at all this year, which will likely cause further declines on GBPUSD and EURUSD given divergence on rate policies between the respective central banks.
Before the US numbers come out, we have Europe's inflation numbers on Tuesday expected to show further declines on the core CPI print. Further signs of disinflationary pressures could see markets price in a second rate cut by the ECB in July versus September and thus be negative for EUR.
Quiet day ahead with only consumer confidence numbers out from Europe. This morning speculation that Japanese authorities have intervened on USDJPY has caused broad USD selling across the board erasing some of the gains USD made on Friday. However, this could well be short-lived, providing USD buyers a good opportunity to buy USD again near key resistance levels. Underlying fundamentals and should this week's Fed commentary and data support hawkish rate pricing we would anticipate further USD gains.
Across the week we saw some weakness on the dollar following a weaker PMI number earlier in the week, seeing GBPUSD and EURUSD retrace to former support, now resistance. Friday’s higher core PCE number however caused demand for dollars, dragging both pairs lower. USD is in focus again this week with the Fed meeting as well as job numbers.
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