USD

The dollar finished the week slightly stronger, despite data confirming a marked slowdown in US Retail Sales. Sales dropped by 1% in March, which was far worse than the 0.4% decline expected. However, the dollar benefitted from an unexpected increase in one-year inflation expectations reflected in the latest Michigan Consumer Sentiment. The greenback was further boosted by ongoing bullish Fed-speak, with the Fed’s Waller pinning his mast firmly to a 25bps hike in May. That outcome has risen sharply to almost 90%*, given Waller’s hawkishness. Overall, the dollar index (DXY) slipped by around 0.5% throughout last week.

EUR

Inflation in the Euro remains mixed, trending lower in Spain but probing higher in France. Key regional inflation is due later this week, with core inflation set to creep ever-lower toward the magic 5% region. EUR/USD finished the week around 0.75%, which could have been higher, but for that late dollar rally into the close. GBP/EUR lost nearly 1%, highlighting broader gains for the single currency. 

GBP

It is a big week for UK data, with inflation and employment data set for release. Employment should remain robust, with ILO unemployment remaining at (or near) a remarkably healthy 3.7%. Even if there is a marked decline to around 10%, as expected, UK inflation remains almost double the US. That will surely give the BoE a big headache as they consider further UK rate hikes against a fragile economic recovery. GBP/USD had a flat week, having previously traded at an almost one-year high. 

JPY

The strong rally in risk assets is no friend for the safe-haven Yen, helping to drive USD/JPY to a one-month peak throughout last week. There was a 1.2% rally for the pair overall. EUR/JPY fared even better, rising by an impressive 2% over the same period. Japanese inflation is set to continue to trend lower when released later in the week. That could stoke further Yen declines (USD/JPY rallies). 

CAD

The Loonie had an impressive week, with USD/CAD slipping by over 1.2%, despite the BoC remaining on hold. However, the decision was perhaps not as clear cut as expected. This week’s Canadian inflation data could confirm a further decline, which is one big reason for the BoC’s inaction. Oil prices continue to trend higher, further supporting the resurgent Loonie. 

MXN

USD/MXN edged around 0.6% lower as the pair responded to an ever-strengthening Peso. However, Peso bulls need to remain vigilant, given that we are close to the recent Peso high (USD/MXN low). Their vigilance is heightened, given the recent Fed rate hikes, which could boost the dollar across the board. 

BRL

The Real continues to lead the charge amongst emerging market currencies. USD/BRL slipped by over 2.5% throughout last week, marking a cool 6.25% decline since the middle of March. The pair has also descended to levels not witnessed in almost a year. 

CNY

 

It is a big week for Chinese economic data, with GDP headlining. Growth is expected to have increased by around 2.2% (QoQ) during the first quarter, as China re-opened from the pandemic shutdowns. USD/CNY remains relatively flat ahead of the data.