Dollar Softens, Pound Faces Pressure, Euro Eyes Upside.

• The US dollar index decreased for the fourth consecutive session due to a weaker-than-expected US jobs report and Federal Reserve Chair Jerome Powell’s dovish remarks.
• Despite this, the dollar strengthened against the yen following suspected interventions.
• Speculations of potential rate cuts by the Bank of England (BoE) could undermine the pound, especially against the dollar.
• Short-term yield differentials and anticipated BoE policies have supported the pound, but HSBC anticipates rate cuts starting in June, likely before the US Federal Reserve.
• The euro surged against the dollar after the US job report, prompting market anticipation of an earlier start to the US Federal Reserve rate cutting cycle.

USD Weakens Amid Soft Jobs Report, Fed Comments

The dollar index saw its fourth consecutive decline on Monday, spurred by a tepid US jobs report and echoed sentiments from Federal Reserve Chair Jerome Powell. Despite this, the greenback gained ground against the yen following suspected interventions. The index, measuring the dollar against major currencies, marked its longest decline streak since March. The subdued job growth in the US eased concerns of imminent rate hikes, aligning with Powell’s stance on maintaining current rates. While the economic calendar for the week is light, attention is drawn to the University of Michigan’s consumer sentiment reading on Friday and speeches from Fed officials. Thierry Wizman from Macquarie in New York anticipates continued dollar weakness, contingent on supportive data and Fed commentary. The dollar index slipped 0.23% to 104.93, with the euro strengthening to $1.0783. Meanwhile, the yen weakened after intervention efforts, ending the week with a 3.5% gain.

GBP Faces Pressure Amid BoE Rate Cut Speculations

HSBC suggests that potential rate cuts by the Bank of England (BoE) could undermine the pound, especially against the dollar. Despite briefly hitting 3-week highs, GBP/USD retreated ahead of the BoE decision. Short-term yield differentials and anticipated BoE policies have supported the pound, but HSBC anticipates rate cuts starting in June, likely before the US Federal Reserve, which could weaken the pound further, exacerbated by recent sterling strength. The UK’s current account deficits, primarily funded by short-term investments, pose additional vulnerabilities, especially if risk appetite declines.

Euro Poised to Test Upside Targets Against Dollar

Following a weaker-than-expected US job report, the euro is positioned to test higher levels against the dollar in the coming days. The Euro to Dollar exchange rate surged after the report, prompting markets to anticipate an earlier start to the US Federal Reserve rate cutting cycle. This shift lowered global bond yields and boosted investor sentiment, favoring the euro over the dollar. However, some market hesitancy persists, tempering the euro’s immediate advance. Sustained momentum will require further evidence of US economic cooling to solidify expectations of rate cuts.