USD Dips Amid Fed Remarks, GBP Faces Downside Risks, EUR Monitors ECB’s Disinflation Concerns.

• USD: DXY dips for second day, influenced by dovish Fed comments, with focus on upcoming US economic data.
• GBP: BCA Research suggests short positions on Pound, citing technical indicators and external vulnerabilities, anticipating potential downside.
• EUR: ECB President mentions eurozone’s disinflation, hints at possible rate cut; markets anticipate 25bp cut in June, with dovish hold likely in April.
• Geopolitical tensions in Middle East and Russia-Ukraine conflicts may support safe-haven demand for USD.
• Tomorrow’s CPI inflation data for March crucial for EUR, expected to show slight decrease in both headline and core readings.

USD: The US Dollar Index (DXY) is facing a second consecutive day of decline, hovering around 104.75 during the early European session. This retreat follows dovish remarks from Federal Reserve (Fed) policymakers, with attention now turning to key US economic data including the ADP Employment Change and ISM Services PMI. Despite positive data such as rising JOLTS Job Openings and improved Factory Orders, geopolitical tensions in the Middle East and Russia-Ukraine conflicts may bolster safe-haven demand for the USD. Market focus also centers on Fed Chair Powell’s speech for insights into monetary policy.

GBP: Analysts at BCA Research advocate for short positions on Sterling, citing technical indicators, positioning, and external vulnerabilities. The Pound, while benefiting from recent economic resilience, faces potential downside pressure, especially from external triggers. Concerns revolve around the UK’s reliance on portfolio flows to fund domestic spending, coupled with diminishing earnings revisions relative to trading partners. BCA Research recommends selling Pound-Dollar, anticipating a bottoming out around 1.20-1.22 before a potential recovery amid a weakening dollar in the long term.

EUR: ECB President Christine Lagarde acknowledges the eurozone’s disinflationary trend, suggesting that additional data is needed before any decisive action. Comments from ECB officials hint at a possible rate cut ahead, with markets pricing in a 25bp cut in June and potential further cuts throughout the year. However, the ECB’s decision at the upcoming April meeting remains uncertain, with a dovish hold being a real possibility. Tomorrow’s CPI inflation data for March will provide crucial insights, with expectations pointing to a slight decrease in both headline and core readings.