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Apr 29 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Wins Reprieve As Markets Prune Positions Ahead Of Fed

By Paul Spirgel  —  Apr 29 - 02:55 PM

The dollar index fell on Friday, ending a six-day streak of gains ends as euro, sterling and yen shorts covered positions ahead of month end and next week's slew of central bank meetings, with the May 4 Fed rate announcement and presser taking center stage.

Friday's headline PCE and employment cost data indicated inflation continues to rise, which moved front-end Eurodollars lower, implying higher rates, and reversing Thursday’s slight price gains after an unexpected contraction Q1 GDP.

The elevated inflation pressures -- even with core PCE prices decelerating in March -- should keep the Fed's dollar-supportive hawkish 2022 rate expectation intact, with position pruning the main weight on the U.S. currency on Friday.

The Fed remains the most enthusiastic central bank about rate hikes, and if next week's FOMC meeting leaves in tact current market projections for the fed funds rate, the dollar is likely to resume its climb.

Fedwatch on Eikon now shows a 100% chance for a 50bps hike on Wednesday.

EUR/USD held on to early gains, on track to end NorAm at 1.0570 up 0.64%, as German yields rose after the euro zone posted above-forecast inflation.

USD/JPY fell 1% to 129.49, ending U.S. trade slightly above its New York session low at 129.33.
Yen shorts were reducing positions into April’s month-end after USD/JPY rose nearly 10 big figures.

GBP/USD rallied further away from Thursday’s 21-month low at 1.2412, looking to end around 1.2603, up 1.14% on the day.

GBP shorts squaring helped boost the pound, with Wednesday’s Fed meeting Thursday’s BoE meeting presenting the possibility for plenty of volatility.

A further dovish steer by the BoE should counteract the recent rise off 2022 lows, putting May 2020 lows by 1.2252 in sharp focus.

BTC and ETH were well offered, dropping 2.75% and 4% respectively.
Expected hikes and the removal of accommodation next week by the RBA, Fed and BoE will continue to weigh on cryptos.

BTC support at $37k was in focus, and a drop below would put Feb 24 lows by $34.3k in sharp focus.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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