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Dollar off lows as data keeps soft landing hopes alive

Euro clocks late March 2022 high; sterling little changed as month-end looms. C$ ticks up from 4-week lows, and Buck moves higher after data threatens to delay Fed rate pause.

Joseph Manimbo

Global overview

The U.S. dollar steadied above one-year lows against the euro with many sidelined ahead of new data on the world’s largest economy. Sterling and the Canadian dollar also were little changed keeping the former near 2023 peaks and the latter close to four-week highs. The dollar has favored its back foot this week as mixed signals on the U.S. economy did little to allay worries about a looming recession. Fresh data today will shed light on how the economy kicked off the year. First quarter growth, considered the nation’s economic report card, is forecast to moderate to a 2% annual rate after it grew by 3.2% and 2.6% over the third and fourth quarter of last year, respectively. America’s job market is also in focus with weekly jobless claims expected to extend a rising trend to 248,000 from 245,000 previously. The dollar could stabilize if today’s data is consistent with a resilient U.S. economy and a tight labor market. Weaker than expected surveys, on the other hand, could leave the dollar at risk of another downward setback, outcomes that would aggravate recession worries and increase pressure on the Fed to cut interest rates by year-end.

Euro clocks late March 2022 high

The euro steadied as it consolidated gains that a day earlier had propelled to its highest level since late March 2022. The euro is among the year’s top performers amid mounting signs of a resilient European economy. High inflation, coupled with more economic momentum than recently thought, provides a runway for the European Central Bank to raise borrowing costs from 3%. Data today showed that euro zone economic sentiment ticked higher in April, to 99.3 from 99.2 in March, though the pace of improvement has shown signs of leveling off which highlights the still fragile growth outlook.  

Euro Area economic sentiment levels off. Euro Area, economic surveys, DG ECFIN, economic sentiment indicator, balance, SA.

Sterling little changed as month-end looms

A steady UK pound was camped near highs for the year against the greenback ahead of new numbers today on the health of the U.S. economy. Sterling could make a run for recent highs if U.S. data offer more evidence of decelerating growth. Better than expected U.S. surveys, on the other hand, could leave some of the pound’s gains at risk, as some could use the occasion to book some profit on sterling’s bullish run ahead of month-end on Friday.

GBP/USD exchange rate. 2023 performance historical, weekly intervals, spot mid-rate.

C$ ticks up from four-week lows

The Canadian dollar firmed as higher oil offered support. Both have struggled this month as crude and the loonie slipped this week to late March lows as concerns grow about the outlook for global growth. Wednesday’s release of the minutes from the Bank of Canada’s mid-April meeting also eased some pressure on the loonie as they signaled the door hasn’t been closed to higher interest rates with inflation not expected to return to the central bank’s 2% goal until next year.

Bank of Canada, Overnight Target Rate. Canada, Policy Rates, Bank of Canada, Overnight Target Rate.

Buck moves higher after data threatens to delay Fed rate pause

The dollar moved higher after mixed data on the U.S. economy stopped short of closing the door to higher rates after May. The U.S. economy grew at a 1.1% annual rate during the first quarter which was below consensus forecasts of 2% from 2.6% in the fourth quarter. A closer look at the data, though, showed stronger consumer spending and higher inflation. Weekly jobless claims unexpectedly improved to 230,000 from a revised 246,000 the prior week. Today’s numbers, while mixed, are consistent with a resilient economy that keeps alive hopes of a soft landing.

United States Weekly Jobless Claims. United States, Unemployment, National, Jobless Claims, Initial, Total, SA.

Dollar mostly favors the bottom of recent ranges

Table: rolling 7-day currency trends and trading ranges

Rolling 7-day currency trends and trading ranges.

Key global risk events

Calendar: Apr 24-28

Key global risk events calendar.

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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.

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