Daily Currency Update

USD - US Dollar

Fed Governor Waller's recent remarks have added to market volatility before the holiday. He emphasized the need for patience in adjusting policies and suggested a cautious approach to lowering rates, citing the need for sustained improvement in data before considering easing. While Waller agreed with Chair Powell on potential rate cuts later this year, he proposed fewer cuts or delaying them due to recent inflation figures. This has led to a slight increase in the USD, bond yields, and spreads favoring the USD, though not significantly enough to drive further major gains in the currency. Upcoming US economic data includes final GDP figures, Michigan Sentiment, with speeches by Fed Chair Powell and SF Fed President Daly.

CAD - Canadian Dollar

The USD/CAD pair saw a slight increase in overnight trading, testing the 1.36+ level where recent USD gains have previously stalled. The push above this level has not sustained, with US yields slightly higher, limiting downward pressure on the CAD. Canadian GDP is anticipated to recover in January following weaker December data, with expectations and flash estimates indicating a 0.4% increase. The consensus for Q1 economic growth is around 1%, slightly above the Bank of Canada's January projections.

EUR - Euro

EUR/USD is recovering from its intraday low before the North American market opens, yet remains below the 1.08 support level it found in recent weeks. The possibility of a June ECB rate cut, now seeming more likely than a Fed reduction, could continue to dampen EUR sentiment. Mixed Eurozone data, with German Retail Sales dropping by 1.9% in February and a less-than-expected rise in March Unemployment by 4k, has had some impact on trading.

GBP - British Pound

The UK's final Q4 GDP was confirmed at a -0.3% quarterly rate, as expected. The economy is anticipated to recover in Q1, moving out of the mild recession from the second half of 2023, and to gradually gain momentum throughout the year. Market expectations that the Bank of England (BoE) will delay easing until August are supported by BoE's Haskell's remarks to the Financial Times, indicating rate cuts are "a long way off". This outlook may be offering some support to the GBP against the USD's rise.