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Dollar Weakens in Asia Session and Euro Faces Inflation Data

Dollar weakens Euro inflation data

The dollar weakens, and the Euro awaits inflation data. Central banks’ policies and economic indicators shape market expectations.

Asia Session Recap

During the Asia session, the demand for the US dollar notably decreased, resulting in a drop in the dollar index (DXY) below 105.50. Simultaneously, gold prices also experienced a decline, showcasing a positive correlation with the dollar. Spot gold prices dipped to $2,319.97 per ounce but later retraced to move back above $2,330 per ounce. Additionally, crude oil prices faced pressure, with WTI oil dropping below $83.50 per barrel.

Expectations for Europe & US Sessions

In Germany, headline and core inflation have exhibited a significant easing trend over the past seven months, coinciding with sluggish economic growth, particularly in the manufacturing sector. Should April’s results continue this softening trend, it could exert downward pressure on the Euro.

Dollar Weakens in Asia Session and Euro Faces Inflation Data

The Dollar Index (DXY)

No major news events will affect the Dollar Index today. However, without significant US calendar news, the DXY might experience a pullback after last Friday’s ‘hot’ PCE result fueled a strong rebound. Today’s near-term support and resistance levels are projected at 105.50 and 106.50, respectively.

Central Bank Notes

The Federal Funds Rate target range remains unchanged at 5.25% to 5.50%, reflecting the Federal Reserve’s commitment to achieving maximum employment and a 2% inflation rate over the longer run. Recent indicators suggest solid economic expansion and robust job gains despite the uncertain economic outlook.

Gold (XAU)

No major news events are anticipated for gold today. However, the positive correlation between the dollar and gold suggests that if this relationship persists, spot gold prices could drift lower alongside the dollar. The near-term support and resistance levels for gold are $2,315/oz and $2,390/oz, respectively.

The Australian Dollar (AUD)

Although the PCE Price Index data last Friday exceeded expectations, the Australian dollar remained resilient, staying above 0.6500. AUD/USD opened lower today but reversed to rise towards 0.6550, a strong resistance zone observed in mid-April.

Central Bank Notes

The Reserve Bank of Australia (RBA) maintained the cash rate target at 4.35%, marking the seventh pause in the last eight board meetings. Inflation remains elevated, but the RBA expects it to return to the target range of 2–3% by 2025.

The Kiwi Dollar (NZD)

The New Zealand dollar (NZD) opened higher today, with near-term support and resistance levels projected at 0.5900 and 0.5975, respectively.

Central Bank Notes

The Monetary Policy Committee of the Reserve Bank of New Zealand (RBNZ) kept the OCR unchanged at 5.50% for the sixth consecutive meeting. Inflation remains above the target range, necessitating a restrictive monetary policy stance.

The Euro (EUR)

Today’s key event is the release of Germany’s CPI data, expected to reflect a significant easing in headline and core inflation. A soft April result could exert downward pressure on the Euro, which opened lower but is likely to climb higher as the day progresses.

Central Bank Notes

The European Central Bank (ECB) maintained the three key interest rates unchanged for the fifth consecutive meeting, focusing on ensuring inflation returns to its 2% medium-term target.

The Swiss Franc (CHF)

No major news events are anticipated today for the Swiss franc. USD/CHF has ranged approximately between 0.9085 and 0.9150 since mid-April, reflecting significant weakness in the franc.

Central Bank Notes

The Swiss National Bank (SNB) eased monetary policy by lowering its key policy rate in March, citing inflation below 2% and moderate GDP growth.

The Pound (GBP)

Following the release of stronger-than-anticipated PCE Price Index data last Friday, the Pound fell initially but later reversed to climb higher. Today, expectations are for GBP/USD to rise, potentially encountering strong resistance at 1.2550.

Central Bank Notes

The Bank of England’s Monetary Policy Committee (MPC) voted to maintain its Official Bank Rate at 5.25% for the fifth consecutive meeting, with one member advocating for a reduction to 5.0%.

The Canadian Dollar (CAD)

The Canadian dollar remained resilient despite the stronger-than-anticipated PCE Price Index data last Friday. USD/CAD failed to break above 1.3700 and is projected to drift lower today.

Central Bank Notes

The Bank of Canada held its target for the overnight rate at 5.0% for the fifth consecutive meeting, with forecasts indicating an increase in economic growth in 2024.

Oil

No major news events will influence oil prices today. After experiencing a rebound last week, WTI oil prices climbed back above $83 per barrel, with geopolitical risks in the Middle East potentially increasing prices.

In summary, Inflation data releases and central banks’ monetary policy considerations will drive continued market movements in the European and US sessions.

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