US Dollar strength in the last 24 hours has seen both GBP/USD & EUR/USD lose ground from last week, with both currency pairings losing close to 1%. GBP/USD had dropped to its lowest level since February with US manufacturing expanding for the first time since September 2022. Reports out of The US are also suggesting that inflationary pressures facing US companies were increasing again, with prices paid also on the rise. Off the back of this, market expectations surrounding an Interest Rate cut by The Federal Reserve in June have also dropped following this release which played a huge part in Dollar strength. Further US growth will allow the Federal Reserve to keep rates at current elevated levels, and more importantly for longer.
The outlook for GBP against The Dollar in particular doesn’t look great, having already dropped almost 3% from its near 7-month highs which we experienced earlier on in March. Moving towards the end of the week, we have the eagerly anticipated Non-Farm employment data which again could potentially provide The Federal Reserve with more reason to keep rates at their current levels. As ever with this release, any deviation away from current projections will undoubtedly spark some market movement for USD currency pairs.
Elsewhere this week, we Year-On-Year Inflation for Europe and early figures seem to suggest another minor drop in prices. Again paving the way for The European Central Bank to potentially be the first to make a move out of the main 3 central banks. If inflation were to come in lower as expectations suggest, it wouldn’t be a surprise to see the Euro weaken further against The USD in particular.