The USD lost further ground against major currency pairs overnight after The Federal Reserve raised their Interest Rates by a further 25 basis points, but crucially stated that they no longer anticipate further rate increases will be needed to bring inflation under control. Comments that this should mark the end of this hiking cycle led to The USD weakening as The Federal Reserve will rely on the impact of the financial conditions off the back of the recent banking crisis in The U.S before considering any further hikes.
The fragile environment within The U.S banking system weighed further on The Dollar with the weekends collapse of First Republic Bank making it now three regional banks to have collapsed just within the last few months. This doesn’t look like coming to a stop anytime soon with PacWest Bancorp stocks falling over 50% overnight after reports from Bloomberg suggesting the bank will need to explore strategic options throughout Thursday.
Keeping with Interest Rates, The European Central Bank is expected to also raise their interest rates by 25 basis points. EUR/USD has reached just below 1.11 and markets are anticipating further strength to reach 1.15 by the middle of this year. Producer Price inflation figures are also due out later today, with expectations of prices still showing an annual rise of 5.9%, showing that whilst The Federal Reserve & Bank of England will more than likely pause on hikes, The European Central Bank still have some work to do.
We end the week tomorrow with the hugely anticipated Non-Farm Payroll data. This data release usually weighs heavy on The Dollar, and is expected to show a drop of 56,000 in terms of job openings for April, which could also coincide with their unemployment rate in April edging slightly higher. Both data releases will be eagerly watched by The Federal Reserve as will releases such as Retail Sales when it comes to future rate decisions.