The USD is slightly lower at the week's start, following market relief after Iran's missile attack on Israel. While the conflict remains contained, oil prices have fallen, and stocks are mixed. The USD has dipped amid a calmer geopolitical scene. Today's economic data, including expected rises in Retail Sales and improvements in the April Empire Manufacturing index, might not significantly impact the USD. However, a potential miss in Retail Sales due to high prices affecting demand could weaken the USD further. Overall, broader trends and technical indicators remain favorable for the USD.
The CAD has slightly improved overnight, despite crude oil easing due to reduced Middle East tensions and mixed metal prices, with copper and aluminum strengthening due to new sanctions on Russian supplies. The CAD's recent gains might be due to minor adjustments after last week's losses, but wider spreads continue to hinder its performance. Significant changes in US or Canadian monetary policy, which could bolster the CAD, appear unlikely. Upcoming data shows Manufacturing Sales may increase by 0.7% in February, and March Housing Starts could rise to 245k. Tomorrow's CPI is expected to rise by 0.7%, potentially offering the CAD minor support against the strong USD. Observe USD/CAD trends.
The EUR has edged higher overnight, primarily due to a consolidation in the USD and minimal news. Eurozone Industrial Production increased by 0.8% in February, meeting expectations. ECB Governor Simkus indicated that the ECB might cut rates up to three times this year, with a possible fourth. However, the significant 2Y EZ/US rate spread of -204bps will likely keep any EUR gains limited for now.
Sterling has performed moderately well today, gaining alongside riskier currencies as market jitters subside. However, slowing UK inflation and postponed expectations for Fed rate cuts are challenging the advantage from expectations that the Bank of England (BoE) would be slower to cut rates among G10 central banks. Swaps do not fully price in a 25bps cut in the BoE's key rate until August. Slower CPI data expected Wednesday could increase speculation about an earlier rate cut.
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