Dollar pullback continues amid emerging market volatility
The dollar fell against almost every other G10 currency last week ahead of this Wednesday’s Federal Reserve meeting.
FX Market Updates
The US dollar continued its recent trend lower last week, falling modestly against every G10 currency save the Australian dollar. The moves there were, however, modest and most of the action took place in emerging markets. It was hard to discern a theme, since the Brazilian real rose strongly but other Latin American currencies like the Chilean and Colombian peso struggled. The worst performer was the Turkish lira, down over 4% as investors continue to vote with their feet on Erdogan's unorthodox monetary policy.This week focus will be squarely on the Federal Reserve April meeting on Wednesday, although markets are not expecting any significant changes either in policy or communications from the Fed. US GDP growth (Thursday) and PCE inflation (Friday) are also key, as will be the Euozone flash inflation report for April and Q1 GDP data, both released Friday.
Source: Refinitiv Datastream Date: 23/04/2021Overall, we think that the string of very positive economic surprises that we have seen in the US will now have its counterpart in the Eurozone, as lockdowns are progressively lifted and consumer pent up demand is felt, particularly in the services sector. Consequently, we think that the euro rally has a way to go yet.
Source: Refinitiv Datastream Date: 23/04/2021Overall, we think that the string of very positive economic surprises that we have seen in the US will now have its counterpart in the Eurozone, as lockdowns are progressively lifted and consumer pent up demand is felt, particularly in the services sector. Consequently, we think that the euro rally has a way to go yet.