Daily Currency Update

USD - US Dollar

Core US CPI has been one of the biggest FX movers over the last 12 months and today's March release is expected to show another sticky 0.4% month-on-month reading. Sticky inflation is probably the biggest risk to the consensus views in the FX. Today  also sees the release of the 22 March FOMC minutes, where the Fed pushed ahead with a 25bp hike after recently announcing new dollar liquidity programmes. Undoubtedly there will be a lot of noise in the minutes and it is unclear what they will mean for current market pricing of a final 25bp hike in May (75% priced) and a subsequent 60bp easing cycle by year-end. Expect USD to be driven by any surprises on the March CPI today and the sharper reaction (risk negative, dollar rally) would probably come on an upside surprise.

CAD - Canadian Dollar

The Bank of Canada announced a conditional pause in late January, and although the economy has begun the year a little stronger than it expected, there is no compelling reason to expect it to move today. The target rate is at 4.5%. March CPI will be reported next week. In February, it was 5.2%. It peaked at 8.1% last June. The Bank of Canada forecast its it to fall to 3.6% this year and 2.3% next year. From an FX perspective, the US dollar slipped to CAD1.3450, a four-day low. It has spent little time above yesterday's settlement (~CAD1.3465). Session highs, so far, were recorded in the Europe near CAD1.3470. The next important support area is near CAD1.3400. On the upside, the greenback faces resistance in the CAD1.3500-25 band. Observe the USD/CAD trends.

EUR - Euro

EUR/USD is enjoying some gentle support as investors return from their Easter break. US core CPI will be the key event of the day and will determine whether EUR/USD has a chance of breaking above 1.10. Apart from the US CPI, look out for several European Central Bank speakers today. The mood seems to be that inflation remains sticky, meaning that expectations for a further 50-75bp of ECB tightening this year will hold. EUR/USD to trade a 1.0900-1.0950 range into the pivotal US CPI release

GBP - British Pound

The main focus for sterling markets in the near term is whether the Bank of England (BoE) will push ahead with one last 25bp hike on 11 May. This would take the Bank Rate to 4.50%. The market prices an 80% chance of such an outcome. Providing insights into the latest BoE thinking will be Governor Andrew Bailey, who speaks in Washington today. There is a risk that he hints at a pause, having seen fellow central bankers in Australia and Canada do so over recent months. We see 1.25 as a strong barrier for GBP/USD especially if the BoE governor gives a nod to a pause in May.