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Limited Market Turmoil, Dollar Slumped and Euro Takes the Stage

by Didimax Team

The US Dollar Index or DXY fell again to the range of 101.00. That could be seen in trading on Wednesday (26/April) after briefly rose significantly on Tuesday. 

The market sentiment improved, so traders released their haven assets and bought back dollar rivals. The EUR/USD performance was the best at it’s major arena. 

This pair rose by about 1% to touch 1.1095 where it became their highest level so far. Before, Market participants were quite nervous due to skewed news about First Republic Bank in the United States.

Thus, the releasing high-risk assets and accumulating safe havens were also two factors that make them nervous. However, further deepening of the news shows limited potential impact and no systemic effect on banking system in America. 


USD different Movement is Good for Euro

Lee Hardman, a senior currency analyst at MUFG, stated that the broader impact appears to be limited. Besides that, shares of other regional banks maintained a better performance.

It can be seen that market sees it as an isolated incident. That's why the experts saw a slight increase in risk assets and USD gave back some of its gains yesterday.

The change in the direction of the US dollar is good for the euro and sterling. That is especially amidst the absence of new data from the Eurozone and the UK yesterday. 

Elsewhere, the EUR/USD lifted by about 1%. TheGBP/USD created a total decline yesterday and reached the essential resistance threshold at 1.2500.

Market Sentiments are Supported by the News Updates

The euro and pound continue to move in rhythm with no clear drivers to justify the divergence between the two currencies at the moment. That was as most of the news comes from the U.S. and the dollar side.

That opinion was said by Francesco Pesole, an FX strategist at ING. The publication of the latest economic reports from America yesterday night also supported the improvement in market sentiment. 

The durable Goods Orders posted an increase of +3.2% for month-over-month in March 2023. This made up for a decline of -1.2% in the previous period.

Meanwhile, that was exceeding the consensus estimate pegged at +0.7%. This reflects that the US economy is still quite resilient even though several sectors are suffering setbacks due to high inflation and interest rates

US GDP showed the Economic Growth 

The US dollar index today is slightly strengthening below the threshold of 102.00. Some of the latest economic data yields in America mixed actual figures.

However, it is unlikely to deter the Fed from raising interest rates again next week. The preliminary report of the United States Gross Domestic Product (GDP) shows economic growth reaching 1.1%.

That was in the first quarter of 2023. The pace of growth was much slower than the 2.6% increase in the previous period, while missing the consensus estimate of 2.0%. 

Market participants focus more on one of the inflation data contained in the GDP breakdown. Core PCE prices recorded an increase of 4.9% in the first quarter of 2023, still showing an uptrend from an increase of 4.4% in the previous period. 

The Fed May Increase their Rate Again

The increase also outperformed the consensus estimate pegged at 4.7%. The knee-jerk reaction that could be seen was to sell the dollar, as yields weakened after weaker-than-expected GDP data. 

However, the market seems to want to focus on higher quarterly core PCE numbers. That possibility was stated by Erik Bregar. Erik is a director of FX and precious metals risk management in a company named Silver Gold Bull.

He believes that the weak GDP data should not deter Federal Reserve from raising interest rates. The plan is by 25 basis points at next week's FOMC meeting, especially as core PCE continues to rise. 

In line with this analyst's opinion, market data shows an 88% chance of a Fed rate hike next week. Other data from the U.S. Department of Labor tonight showed the number of jobless claims reached 230k in the week ending April 22, 2023.



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