USD, EUR, and GBP Movements Ahead of this weeks ECB Interest Rate Decision.

  • US Dollar pressured by cooling inflation: Latest PCE index shows a slight cooling in inflation, reducing the likelihood of aggressive rate hikes by the Federal Reserve​
  • Modest GDP growth for USD: US Q1 GDP growth revised down to 1.3%, meeting market expectations and contributing to a slight decline in the Dollar Index​​
  • Euro under pressure ahead of ECB rate decision: Despite better-than-expected HCOB Manufacturing PMI (45.7), the euro remains under pressure with the market anticipating a rate cut from the ECB tomorrow​​
  • German inflation rises but ECB cut still expected: Rising German inflation has not swayed market expectations of an ECB rate cut, impacting the euro’s stability​
  • British Pound shows resilience: Sterling edges up against the USD, bolstered by expectations that the Bank of England may hold off on rate cuts due to persistent inflation concerns, though it faces technical resistance for further gains​​

US Dollar (USD) The US Dollar has experienced mixed performance since the end of last week, influenced by a combination of economic data releases and market sentiment. On Friday, the US released its latest inflation data, showing a slight cooling in the Personal Consumption Expenditures (PCE) index. This has put downward pressure on the dollar as it lowers the likelihood of aggressive Federal Reserve interest rate hikes in the near future​. Additionally, the US Q1 GDP growth was revised down slightly to 1.3%, aligning with market expectations but highlighting a modest economic expansion. These factors have contributed to the Dollar Index edging lower, reflecting a cautious outlook from investors.

Euro (EUR) The Euro has seen some fluctuations, particularly ahead of the European Central Bank’s (ECB) upcoming monetary policy decision. Market participants are widely anticipating a rate cut from the ECB tomorrow, despite mixed economic signals from the region. The latest HCOB Manufacturing PMI for May came in at 45.7, indicating a contraction in the sector but slightly better than the forecast of 47.4​. Additionally, German inflation data showed an annual increase, yet this has not deterred expectations of a rate cut, which has kept the euro relatively stable but under pressure against the dollar and other major currencies​​.

British Pound (GBP) Sterling has remained relatively resilient but has faced some volatility. Since Friday, the pound has edged up against the US dollar, supported by expectations that the Bank of England (BoE) may hold off on rate cuts amidst ongoing inflation concerns​​. However, technical analysis suggests that GBP/USD has encountered resistance, indicating potential challenges ahead for further gains​​. Market focus remains on upcoming economic data and the BoE’s policy stance, which will likely drive further movements in the currency.

As we look forward to the ECB’s rate decision and other key economic indicators, the forex market remains poised for potential volatility. Stay tuned for more updates and analyses on how these developments unfold.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.