Daily Currency Update

USD - US Dollar

The Dollar Index (DXY) has shown significant strength today, even as US Treasury yields have slightly retreated from yesterday's highs, with the 2-year bond at approximately 4.75% and the 10-year at around 4.35%, which suggests the index might be somewhat overpriced. The US dollar could require additional support from US yields, especially with the FOMC meeting on the horizon, to maintain its stronger position. Despite today's rise in the USD, the overall volatility in the global foreign exchange market is decreasing. This is evidenced by the JPMorgan Global FX Volatility Index hitting its lowest point in three years this week, indicating a widespread expectation that the erratic trading pattern in spot currencies is likely to persist.

CAD - Canadian Dollar

The CAD has slightly declined today, influenced by a stronger USD, but its losses remain within recent trading ranges. Today's Canadian inflation data could potentially push the CAD up again, with expectations for a 0.6% increase in headline prices for February. Annual inflation is anticipated to rise to 3.1% from January's 2.9%, partly due to higher gasoline prices. This trend might continue due to sustained higher energy prices. The persistence of inflation above 3% suggests that monetary policy may stay unchanged for a while, especially as Canada's housing market has only seen a slight downturn despite concerns over policy tightening and the risk of housing issues resurfacing with the anticipation of lower interest rates. Observe USD/CAD trends.

EUR - Euro

The March ZEW survey from Germany showed continued improvement for the eighth consecutive month, with the expectations index hitting a two-year peak at 31.7. Although the current situation index experienced a slight increase, it remained subdued at -80.5. This rise in expectations indicates a brighter growth forecast for Europe's biggest economy, driven by investor anticipation of reduced interest rates in the future. This positive data has somewhat offset the Euro's losses against a predominantly stronger USD, stabilizing it around the lower 1.08 range.

GBP - British Pound

Sterling has weakened in today's session, primarily due to a stronger USD rather than other factors. It has dipped slightly more than other major European currencies, possibly due to increased selling pressure from technical traders. Upcoming UK CPI data and the Bank of England's decision later this week could help curb further losses. While year-on-year inflation for February is anticipated to decelerate, the monthly price increase is expected to remain robust at 0.7%.