Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD lower as PCE cools
The greenback returned to near seven-week lows on Friday after a key US inflation measure – the personal consumption and expenditure reading (PCE) – was reported in line with expectations.
The report confirmed the better news on cooling inflation from the US’s mid-month CPI numbers.
Headline annual PCE was reported at 2.7% – the same pace as last month – while core PCE was reported at 2.8% also in line with last month’s number.
The USD index was down 0.1% on Friday as it neared lows last seen in early April.
The kiwi was the best on Friday with NZD/USD up 0.5%.
The Aussie also benefited with AUD/USD up 0.3%.
The greenback was higher in Asia with weaker Chinese PMI numbers weighing on the Chinese yuan. USD/CNH gained 0.1% as did USD/SGD.
Rate cuts on the agenda?
The main focus in the week ahead will be central bank decisions from the Bank of Canada on Wednesday night and the European Central Bank on Thursday.
Both central banks are seen as having a high likelihood of cutting rates. Money markets see an 82% chance that the Bank of Canda will cut rates from 5.00% to 4.75%.
Despite moderately higher than expected Eurozone inflation numbers on Friday – the headline CPI climbed from 2.4% to 2.5% – the probability of a rate cut from the ECB this week climbed from 92% to 94% (source Refinitiv).
US jobs key this week
Away from central banks, economic data will also dominate this week.
China sees further news on activity with Caixin PMI numbers due on Monday.
Australia receives an update on March-quarter GDP on Wednesday.
From the US, the focus will be on the build up to Friday’s non-farm payrolls.
Last month, the NFP series missed forecasts for the first time since the October report, and triggered a USD sell-off that caused the greenback to suffer its first monthly decline in 2024 so far.
Aussie, kiwi outperform
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 June
All times AEST
*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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