This week’s dollar market is in a tussle at the high levels it reached up until last week. Following a stubborn decline in the latest U.S. inflation indicators, there have been consecutive statements from officials like Atlanta Fed President Bostick and FRB Governor Waller suggesting a decrease in the number of rate cuts expected this year. Meanwhile, in Europe, the Swiss National Bank has quickly implemented a rate cut, and the expectation of an ECB rate cut beginning in June is becoming predominant. The Bank of England seems to still need to confirm wage trends, but the market is showing movements to bring forward the start of rate cuts. This creates an environment where the dollar appears to be more easily bought.
However, with Good Friday tomorrow and Easter Monday next week, overseas markets are expected to be quiet due to the Easter holidays. With a lack of cues such as U.S. bond yields, whether the dollar will continue to strengthen may well depend on the reopening of NY market trading next Monday.
USD/JPY is heavily influenced by the yen exchange rate. The market has been advancing yen selling following a series of decisions by the Bank of Japan, and yesterday led to the emergency convening of a tripartite meeting between the government and the Bank of Japan. The USD/JPY was bought up just shy of the 152 yen mark. Strong warnings against excessive yen weakening from Finance Minister Kanda and hints at possible intervention led to a yen buying reaction. However, it has maintained the 151 yen level, with the market in a standoff, buying and selling intermingling. As weekend reports can swing the yen exchange rate, it’s probably not safe to assume stability in the 151 yen range during the thin trading of the Easter holiday.
Economic indicators to be announced in the overseas market include U.S. real GDP (final value) (Q4 2023), U.S. initial jobless claims (03/17 – 03/23), Chicago Purchasing Managers Index (PMI) (March), University of Michigan Consumer Sentiment Index (final) (March), and U.S. pending home sales (February).
Regarding speaking events, a lecture by ECB’s Panetta and a conference appearance by François Villeroy de Galhau, Governor of the Bank of France, are scheduled. The day before Good Friday will see a shortened trading session in the U.S. bond market.
The U.S. dollar is currently strengthening. This movement towards a stronger dollar includes aspects of buying from the euro to the U.S. dollar. Regarding the euro, as already mentioned by ECB’s Panetta, “Conditions for policy easing are gradually being met,” it seems the increasing speculation of a rate cut starting in June is leading to selling of the euro.
