Daily Currency Update

USD - US Dollar

The Fed slightly adjusted its policy statement but maintained its guidance, suggesting potential rate cuts once inflation nears 2%. Chair Powell indicated that a rate hike is unlikely and emphasized the current restrictive policy stance, stating that rates are sufficiently high for now. This implies minimal risk of further tightening, with U.S. yields possibly peaking and limited chances for continued USD appreciation. Recent market reactions suggest possible near-term USD losses as investors withdraw from long positions. Additionally, recent U.S. data indicate a potential slowdown in economic activity but persistent inflation. Today's agenda includes U.S. Challenger Job Cuts, Trade data, Unit Labour Costs, weekly claims, and Factory Orders.

CAD - Canadian Dollar

The CAD is slightly up against a defensive USD after the FOMC decision narrowed US/Canada spreads. The exchange rate is around its fair value (1.3712), with support from firmer crude and metals prices. Bank of Canada Governor Macklem indicated to lawmakers that rate cuts are approaching, contingent on sustained progress towards price stability. He is scheduled to reiterate this to the House of Commons today. The likelihood of a June rate cut has increased slightly post-FOMC to 60%, with a full cut expected by late July. Upcoming Canadian Trade Balance data for March is anticipated to show a CAD 1.2 billion surplus. Observe the USD/CAD exchange rate.  

EUR - Euro

The Eurozone Manufacturing PMI for March was slightly revised up to 45.7, with improved figures in France and Germany and a strong performance in Spain (52.2), though Italy's data fell below 50 to 47.3. Following the data release, the EUR peaked around the low 1.07 range, maintaining current levels. However, given a less hawkish than expected Fed outcome, the EUR has potential to rise towards my estimated fundamental equilibrium of 1.08 in the short term, reducing concerns of it falling to 1.05 or lower.

GBP - British Pound

Sterling remains stable today. The OECD predicts that the UK will have the weakest economy in the G7 next year, attributing this to high interest rates and fiscal tightening. This forecast could further diminish the already low re-election chances of the Tory government. UK voters are participating in local elections today, which are expected to show significant dissatisfaction with the government.