Euro down as ECB hikes
The euro fell overnight as the European Central Bank raised rates by only 25 basis points as worries about financial stability in the US kept the ECB cautious.
ECB president Christine Lagarde said that the smaller hike “could not be interpreted as a pause” but markets have pulled back on rate hike expectations with only one more full 25bps increase priced in.
In terms of inflation, Lagarde said that persistent core inflation remains the major concern. While headline inflation has fallen in with drops in energy markets, core inflation is mostly unchanged.
Bond market pricing continues to see more likelihood of hikes in the Eurozone versus the US. This provides support to the EUR/USD with the pair near 12-month highs.
USD lower after Fed, eyes support
The US dollar has continued to weaken after yesterday’s Federal Reserve decision.
The AUD/USD gained 0.4% while the NZD/USD climbed 0.8%.
While Fed chair Jerome Powell has said rates cuts in 2023 are unlikely, markets now price in 90 basis points of cuts by the end of the year.
The USD index, a key benchmark of greenback strength, has moved back to key support at 12-month’ lower. A break of this level might be positive for the AUD and NZD.
US jobs to extend strong run?
After a roller-coaster week that’s seen the USD and EUR both weaker after major central bank meetings, and a re-emergence of US banking worries, tonight’s US jobs report could continue to drive volatility.
The US labour market remains remarkably strong. The monthly US non-farm employment report has beaten market expectation in every release since December 2021.
This month, markets are looking for 180k jobs to be added – down from the 236k since last month. The unemployment rate is forecast to climb from 3.5% to 3.6%.
US jobs are due at 10.30pm AEST.
AUD/EUR, NZD/EUR higher after Fed
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 1 – 5 May
All times AEST
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