USD at multi month highs as market looks towards busy week of data

GBP

After market closures on Monday for Easter observance, the Pound started to rise in Tuesday's session, buoyed by a final manufacturing PMI that surpassed expectations. March witnessed the sector's activity returning to growth for the first time since July 2022, bolstering GBP exchange rates.

Subsequently, the Pound's movements against its counterparts were subdued due to a lack of significant macroeconomic data releases. Additionally, ongoing speculation intensified that the Bank of England might initiate interest rate cuts in June, adding further downward pressure on the Pound.

On Thursday, the Pound experienced weakness after a downward revision to March's finalized service sector PMI. The reading came in at 53.1, indicating a faster slowdown in activity compared to what the preliminary reading had suggested.

On Friday, the absence of significant data led to fluctuating movements in Sterling throughout the session. Moreover, risk-averse trading conditions exacerbated the dampened sentiment towards the currency.

For the Pound, the upcoming week appears to be relatively light in terms of data releases, with Friday's GDP data print being the highlight.

As a result, short-term attention might turn to the British Retail Consortium's upcoming retail sales data. Market expectations anticipate a 1.1% increase in sales for March, potentially providing support to the Pound during Tuesday's session.

On Friday, February's UK GDP data is scheduled for release. Economists are forecasting a contraction of 0.3% on a monthly basis for the UK economy, which could exert significant pressure on the Pound and suggest ongoing economic challenges.

EUR

With European markets closed on Monday for the Easter holidays, the Euro commenced the week on a subdued note.

On Tuesday, the Euro strengthened against some weaker counterparts, benefitting from its negative correlation with a weakening US Dollar, which provided some support. However, its gains were limited by a cooling in German inflation, leading to increased speculation of European Central Bank interest rate cuts. Nonetheless, the Euro managed to edge higher against its peers despite an unexpected slowdown in Eurozone inflation.

In March, both core and headline inflation rates cooled, contrary to expectations of the headline consumer price index remaining unchanged. However, due to the Euro's inverse correlation with the USD, it managed to hold steady against its peers.

The Euro experienced mixed trading on Thursday as well. Although the final services PMI for March in the Eurozone was revised higher, the common currency's upward momentum was curbed by the release of the European Central Bank's latest meeting minutes.

The minutes reinforced the argument for investors that the ECB would likely pursue an interest rate cut in June, thereby weakening the EUR.

On Friday, the common currency fluctuated during the European session in response to lackluster economic data. German factory orders rose below expectations in February, while retail sales across the Eurozone declined by 0.5% on a monthly basis.

Turning our attention to the week ahead for the Euro, several impactful data releases are expected to trigger volatility in the common currency's trading.

Beginning with Monday, the latest German trade data is scheduled for publication. Forecasts suggest that in February, the German trade surplus may have contracted from €27.5 billion to €26 billion. Such a development could potentially weaken the Euro, indicating challenges in trade for the Eurozone's largest economy.

Subsequently, EUR exchange rates are expected to stay subdued as investors start to anticipate the European Central Bank's interest rate decision on Thursday.

While it's improbable for the ECB to reduce interest rates, any indication in its accompanying forward guidance suggesting that the central bank will soon commence unwinding its monetary policy could exert significant downward pressure on the Euro.

USD

The US Dollar kicked off the week on a robust note, reaching multi-month highs against most of its counterparts following the release of the latest ISM manufacturing PMI. The data surpassed forecasts and indicated a return to growth for the first time in 16 months.

However, on Tuesday, the US Dollar weakened as profit-taking ensued, with investors capitalizing on the currency's recent surge to its highest level since November 14th.

In the afternoon, the latest US job openings figure failed to buoy the Greenback, despite surpassing forecasts. USD exchange rates continued to remain under pressure.

On Wednesday, the US dollar tumbled following the release of the latest ISM services PMI data, which came in below market expectations.

The data reported a slowdown in growth levels rather than a slight expansion as previously expected, which saw the US dollar suffer notable losses.

On Thursday, the Greenback continued its decline following dovish comments from Federal Reserve Chair Jerome Powell.

USD also encountered additional selling pressure in the afternoon session, as the latest initial jobless claims figure rose more than expected.

The US Dollar concluded the week by surging against the majority of its counterparts after the release of the latest domestic non-farm payrolls data.

March's figure soared beyond expectations, with 303,000 new jobs created in March, significantly surpassing predictions of a more modest 200,000.

Furthermore, the latest unemployment figures for March remained unchanged at 3.8%, defying predictions of a rise to 3.9%. This provided additional support to the Greenback.

Looking ahead this week, the primary driver of movement for the US Dollar exchange rate this week is expected to be a surge of US macroeconomic data.

The latest US headline and core inflation data for March is set to be released on Wednesday, with forecasts indicating a slight cooling. If the data prints as expected, this could potentially weaken USD exchange rates in mid-week trading.

Also slated for release on Wednesday are the Federal Reserve's latest interest rate decision meeting minutes. Any additional guidance on monetary policy could inject volatility into the Greenback.

On Thursday, the forecast for the latest domestic PPI data for March suggests a decline from 0.6% to 0.3%. Such a development could potentially weigh on the American currency towards the latter stages of the week.

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