Thursday, 23 May 2024

Euro at highest to yen since 2008, markets nervy over Toyko stepping in

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That was in sharp contrast to just a few weeks ago when markets were betting on June for the U.S. monetary easing cycle to begin, a shift that has driven the dollar higher, Reuters reported.

The pound dropped to a five month low of $1.2299 against the dollar on Monday, though it was last at $1.234, as strong British business activity data helped it to steady.

Investors will have another chance to assess the strength of the U.S. economy this week, with first-quarter gross domestic product data on Thursday and personal consumption price expenditures (PCE) index, the Fed’s preferred measure of inflation, on Friday.

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“It is conceivable that markets further push back the timing of the expected first rate cut from September, if this week’s GDP and/or PCE adds to concerns about disinflation stalling. The risk therefore lies towards higher U.S. yields and a stronger USD,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

Markets forecasts are for a 0.3% increase in the headline PCE number in March, unchanged from the previous month, and a year-on-year gain of 2.6%, compared with a 2.5% increase in February, according to a Reuters poll.

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