The US dollar gained by 1.58% this week versus the basket of six major currencies and fell down by -0.24% the previous week. Meanwhile, on Friday, the US Dollar Index (DXY) gained with 0.64% and closed at 105.927. On April 9, the NFIB Small Business Index held at 88.5, while RCM/TIPP Economic Optimism fell to 43.2, below the expected 44.2. April 10 saw Core CPI m/m at 0.4%, beating projections of 0.3%, with CPI y/y at 3.5%.

Crude Oil Inventories showed a negative 5.8 million, and the 10-year Bond Auction remained steady at around 4.56%. On April 11, Core PPI m/m stayed at 0.2%, while PPI m/m fell to -0.2%, and Unemployment Claims came in at 211K, below the expected 216K.

Throughout the week, amidst strong inflation statistics, hawkish expectations on the Federal Reserve propelled the market’s bullish momentum. Rate-cut expectations changed in response to Fed remarks and CPI data. Strong job market data first raised the possibility of a postponement of rate cuts, but later on, Fed officials’ dovish comments dampened expectations. 

In the FOMC meeting minutes, Federal Reserve officials expressed concern about the sluggish pace of inflation decline at their March meeting, despite anticipating interest rate cuts later in the year. While holding borrowing rates steady, they remained cautious, emphasizing the need for greater confidence in inflation’s return to the 2% target before considering rate cuts, citing geopolitical tensions and rising energy costs as potential inflationary pressures.

USD/EUR Weekly Update

The USD to EUR exchange rate gained this week by +1.70% and with -0.41% loss on the last week. However, the exchange rate gained on Friday with +0.64%, and it closed the day at 0.9381.

German Industrial Production exceeded expectations with a 2.1% increase, while Trade Balance fell short at 21.4 billion euros compared to 25.1 billion euros forecasted. Sentix Investor Confidence was negative at -5.9. French Trade Balance showed a positive reading of -5.2B. Italian Retail Sales declined by 0.1%. Main Refinancing Rate remained steady around 4.50%. Italian Industrial Production decreased by 0.1%. German Final CPI and French Final CPI remained constant at 0.4% and 0.2% respectively.

This week’s volatility in the USD to EUR exchange rate was brought on by divergent central bank policies. Stournaras and Muller of the ECB said that they were in favor of deviating from the Fed’s guidelines but still pursuing a prudent monetary policy. The exchange rate was impacted by persistent speculation about potential rate reduction even though the ECB is projected to maintain current rates. Amidst fears about inflation and differing attitudes from central banks, the USD saw an overall increase against the EUR.

USD/GBP Weekly Update

The USD to GBP exchange rate fell down this week by -0.21% and by +1.07% gained on the last week. However, on Friday, the USD to GBP exchange rate fell down with -0.03% and closed at 0.79197.

BRC Retail Sales beat projections at 3.2%. RICS House Price Balance at -4%. GDP steady at 0.1%. Goods Trade Balance positive at -14.2B.

Throughout the week, there were swings in the USD to GBP exchange rate. GBP fell below 1.2600 as a result of the US Dollar’s strong performance in inflation data. On the other hand, inconsistent UK economic data—such as a 0.1% MoM GDP growth in February and encouraging manufacturing data—failed to materially support the Pound. GBP was under further pressure due to the BoE’s position on rate cuts and the market’s preference for the Fed over the BoE when it comes to rate changes.

Megan Greene, a Bank of England policymaker, emphasized that interest rate cuts in the UK should be postponed due to persistent inflation pressures, differing from market expectations of earlier and deeper cuts compared to the US. Highlighting the stronger labor market in the UK and the risk of hiking rates prematurely, Greene cautioned against premature monetary easing, underscoring the need for a cautious approach in light of lingering inflationary risks.

“The only thing worse than hiking rates and causing a recession is hiking rates, cutting them, and then having to hike them much further in the end,” she said. Greene’s statements differed from recent comments by Bank of England Governor Andrew Bailey, who has openly discussed the potential for rate cuts this year, deeming such expectations as “reasonable.”

USD/CAD Weekly Outlook

The USD to CAD exchange rate gained this week by +1.16% and gained by +0.39% on the last week. Also, on Friday, the USD to CAD exchange rate closed the week at 1.37453 gained +0.42%.

Building Permits m/m data with a positive actual reading of 9.3% was released on April 10. Overnight Rate data, which had a constant value of 5.00%, was announced on Wednesday.

This week, there were swings in the USD to CAD exchange rate due to changing expectations about the Federal Reserve and Bank of Canada’s interest rate decisions. The BoC made a suggestion about a likely rate drop in June amidst decreasing inflation pressures, even if the Fed is expected to postpone rate cuts until after September due to stubborn inflation.

The Canadian Dollar, a significant oil exporter, was impacted by the volatility of oil prices, which was a result of geopolitical concerns in the Middle East.

After rising for previous 4 weeks, the WTI Crude Oil prices experienced some fall this week by around -1.47%. The declining oil prices kept commodity linked currency Loonie under pressure and hence USD to CAD exchange rate flourished this week. Price instability was exacerbated by a 3.034 million barrel increase in US crude oil stockpiles. Furthermore, the Biden’s demand of ceasefire from Israel along with UN voting in favor of ceasefire also weighed on the WTI Crude Oil prices this week.

USD/AUD Weekly Outlook

The USD to AUD exchange rate gained by +1.43% this week and fell down by -0.88% on the last week. The USD to AUD exchange rate gained by +0.79% on Friday after closing its day at 1.5410.

Westpac Consumer Sentiment data showed a consistent value of -2.4% on Tuesday. Data on NAB Business Confidence, which had a constant value of 1, was issued on April 9.Data on MI inflation expectations, which had a consistent value of 4.6%, was issued on Thursday.

The USD to AUD exchange rate was under pressure to decrease over the week as a result of weaker Australian statistics, such as a decline in Westpac Consumer Confidence and a narrower Trade Surplus, and increased USD buying. Meanwhile, the Chinese Yuan’s effect on the Australian dollar remained uneven, with increasing ties with Australia at odds with worse trade and CPI figures.

Despite tentative signs of stabilization, a Reuters poll suggests China’s economy likely grew by 4.6% year-on-year in the first quarter, marking its slowest pace in a year. This underscores continued pressure on policymakers to introduce further stimulus measures. Additionally, economists predict that China’s GDP will maintain a subdued growth rate of 4.6% throughout 2024, below the official target of around 5.0%.

USD/INR Weekly Update

Unlike other currencies, the USD to INR exchange rate gained this week by +0.21% and fell down by -0.08% last week. On Friday, the INR remittance rate gained by 0.17% and closed the market at 83.4230.

The US Treasury bond yields, rising oil prices, and Indian economic data were some of the variables that caused swings in the USD to INR exchange rate throughout the week. Despite pressure from USD demand, the strong economic outlook helped the Indian Rupee.

Government data revealed that India’s annual retail inflation rate dropped to a five-month low in March, primarily driven by a decrease in fuel prices. The inflation rate stood at 4.85%, lower than February’s 5.09% and below the 4.91% forecast by economists. Despite this, food inflation increased slightly to 8.52%, while fuel prices saw a sharper decline of 3.2% year-on-year.

USD/SGD Weekly Outlook

The USD to SGD exchange rate gained by 0.78% by this week and fell down by -0.06%   on the last week. On Friday, the Singapore dollar exchange rate gained by +0.46% and closed at 1.35910.

MAS sticks to its course, predicting 2.5–3.5% inflation and 1-3% GDP growth in 2024. The Monetary Authority of Singapore (MAS) announced its decision to maintain the prevailing rate of appreciation of the S$NEER policy band, keeping it unchanged in width and level. Despite a slightly negative output gap, Singapore’s economy is expected to strengthen throughout 2024, with GDP growth forecasted between 1–3%. 

MAS projects both MAS core inflation and CPI-all items inflation to average between 2.5–3.5% for the year, with core inflation remaining elevated initially but moderating towards the end of 2024 and into 2025. The current monetary policy settings are deemed appropriate to ensure medium-term price stability, with close monitoring of global and domestic economic developments for potential impacts on inflation and growth.

Conclusion

In summary, the US dollar experienced mixed movements against major currencies this week. It gained against the EUR, CAD, AUD, SGD, and INR, while it fell slightly against the GBP. The volatility was influenced by various factors including central bank policies, economic data releases, and geopolitical tensions impacting oil prices. Despite the fluctuations, the US Dollar Index (DXY) closed the week with a gain, reflecting overall strength against the basket of six major currencies.