Daily Currency Update

USD - US Dollar

The USD is starting the week lower, despite market preparations for a likely hawkish shift at Wednesday’s FOMC meeting. Persistent inflation and strong economic data have reduced confidence that the Fed will adjust interest rates significantly by year-end, with expectations of just over one 25bps cut by December. Today is a light data day, but markets have much to ponder this week. Besides the Fed, the US will release jobs data on Friday, and key Eurozone economies will publish Q1 GDP data. With a holiday in much of Europe on Wednesday and reduced activity into next week (with the UK closed on Monday), the USD’s outlook remains strong, but much positive news seems factored in, limiting its broader appreciation potential amid global economic adjustments.

CAD - Canadian Dollar

The CAD is relatively stable today, holding onto its modest week-long gains against the USD. Narrower spreads, stronger stocks, and higher commodity prices have supported the CAD’s gains. The currency’s trajectory may be influenced by major tech and industrial earnings this week, although trends in raw material prices could help maintain its current stability. Currently, the CAD is close to its estimated fair value of 1.3678, reflecting recent positive shifts in its drivers. Additionally, Bank of Canada Governor Macklem will speak before a Senate panel in Ottawa on Wednesday. Observe the USD/CAD exchange rate.

EUR - Euro

Spot prices are fluctuating around the 1.07 mark, with the 2-year Eurozone-US rate spread stabilizing at approximately -200bps, a low reached last year. Without a rise in US yields or a drop in core European rates, there might be little incentive to significantly lower the EUR. Today's German CPI data could highlight persistent headline inflation issues seen in other countries, although slowing core inflation aligns with expectations for a June ECB rate cut. Upcoming Eurozone Q1 GDP data could mildly support the EUR if it suggests a gradual economic recovery.

GBP - British Pound

Sterling is slightly up against the weak USD today and marginally ahead of the EUR, but trading remains light due to a lack of domestic drivers. This is expected to continue short-term. However, a strong rebound from last week's low suggests a potential further increase in the pound in the coming days.