Greenback rally ahead?
By Arnaud Masset
Keep your eyes on US inflation figures to be released this week: an upside surprise would trigger another USD rally, as it signal a positive economic outlook. There are many economic data releases coming. The show starts today with the Federal Reserve Bank’s favourite gauge of inflation, the core PCE. Headline personal consumption expenditure is expected to have slightly accelerated in March, with a median forecast at 2% annually compared to 1.8% in the February. The core should print at 1.9% in March versus 1.6% in February. Personal income and spending should both come in at 0.4% month-on-month..
On Monday morning, the US dollar consolidated last week’s gains, while crude oil slid further and equities inched higher. On a trade-weighted basis, the buck rose more than 1% last week and reversed its negative momentum of the last months, thanks to a continuous surge in US treasury yields. After falling 2.8% last week, EUR/USD bounced back 0.60% last Friday and traded sideways on Monday. Even though we believe the European Central Bank will act cautiously in money-tightening, we think the euro won’t go much lower. The Fed is more advanced in its tighten; the ECB has a way to go.
In FX, the Australian dollar and the New Zealand dollar were the worst performers this morning, as investors discount further tightening from either central bank. AUD/USD erased Friday’s gains and returned to $0.7550, while the Kiwi slid to $0.7060, down 0.35%.