Forex Weekly News. FX Daily Market Update | Paymentearth (2024)

The EUR/USD ranged in the high 1.08’s overnight. Europe was waiting for the European Central Bank to shine some light on its interest rate cut plans on Thursday after the Federal Reserve hinted it is getting closer to a move again and the BOJ gave the yen a lift with talk of lifting Japanese rates.

Attention has turned to the ECB. It has just announced a widely expected decision to keep the key euro zone interest rate steady at a record 4.0%.

Isabelle Vic-Philippe, a euro zone bond fund manager at Amundi, said markets were now “close to fair value” pricing in 3-4 ECB reductions this year starting in June.

One of the questions both she and many investors have though is whether the ECB or the Fed will be the first out of the blocks.

“I think the ECB can afford to cut a bit earlier if they are convinced the Fed will follow shortly afterwards,” Vic-Philippe said. “My question (for ECB head Christine Lagarde) would be: Where do you think the neutral rate for the ECB now stands?,” she added referring to where they could end up settling at.

U.S. stocks closed higher on Wednesday after Powell stuck to the script by saying the bank still expects to cut rates later this year even though continued progress on inflation “is not assured”.

That kept bets of a U.S. rate cut in June alive at an 84% probability. Longer-term bond yields slipped, the dollar fell, gold prices hit a record high and oil had jumped on Wednesday.

Indeed, data showed U.S. private payrolls increased slightly less than expected in February, although the report does not have a strong correlation with the official non-farm payrolls report due on Friday.

There was little cheer in markets to the better than expected China trade figures overnight in Asia, however, after an official from the state planner flagged the upside surprise a day earlier.

The pound edged up on Thursday, after UK finance minister Jeremy Hunt’s spring budget offered a raft of tax cuts, but little in the way of surprises for the market, leaving more focus on the direction of the U.S. dollar.

Sterling rose 0.2% to $1.276, its highest in around a month, and nudged into positive territory against the euro, to 85.40 pence.

In his budget on Wednesday, Hunt trimmed national insurance contributions by 2 pence in the pound but stuck to a fiscally cautious mandate that eased anxiety about Britain’s $3 trillion debt burden, boosted consumer stocks and helped the pound stay robust against other major currencies.

Source: Reuters

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