This Monday, the US dollar held steady amid investor hopes that US inflation is starting to slow and that the Federal Reserve might make a rate cut as late as 2024.
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The euro was steady too, but still priced in an impending rate cut from the European Central Bank.
Emerging market currencies, such as the Indian rupee and the Mexican peso moved in response to local elections.
Get all the details of currency moves and more in this analysis.
Forex News : USD remains steady
According to the latest yop Forex news, the dollar remained steady on Monday as investors’ views on the rate situation appeared to switch from whether the Fed may cut interest rates in 2023 to whether it may cut in 2024, as a slowdown in US inflation has become more likely.
The euro also stayed in check and is now primed to see what rate cut the European Central Bank may be able to offer.
The Indian rupee and the Mexican peso moved in reaction to election outcomes in their countries.
Top forex news: U.S. Dollar Stability
The dollar found some support on Monday, even as uncertainty remained over the next move by the Federal Reserve, as investors warmed to the possibility that US inflation may have decelerated enough to warrant rate cuts as soon as 2024.
The euro traded calmly ahead of a widely expected cut by the European Central Bank this week.
Top Forex News: Emerging Market Currencies
As election exit poll results circulated, the Indian rupee and Mexican peso outperformed emerging market currencies.
In India, expectations of a third term for Prime Minister Narendra Modi dampened the possibility of structural changes.
The rupee was the best-performing Asian currency this year – trading at 83.035 per dollar – and is seen as relatively safe amid central bank interest rate hikes.
Power Surge: Oil Trading News Sparks Global Market Optimism
Top Forex News: Mexican Peso Reaction
This was clear Monday morning when the Mexican peso weakened after the ruling party declared Claudia Sheinbaum the winner of the presidential election by an ‘ample margin’.
Top Forex News: Financial Market Outlook
‘This is freakin’ mega week for financial markets,’ said Kathleen Brooks, research director at trading platform XTB, pointing to the ECB rate decision and the Mexican election as two key events affecting the markets this week.
Top Forex News: Dollar’s Monthly Decline
Then in May, the dollar experienced its first monthly decline of the year as rising expectations for a Fed rate cut led to the softening of its largest rival. Currently, markets are discounting 37 basis points of Fed cuts for 2019.
Top Forex News: Inflation and Rate Expectations
April data on Friday revealed that consumer inflation nudged higher but remained above the Federal Reserve’s 2% target, while traders are now assigning about a 60% chance to a Federal Funds rate cut in September, up from 49% before the report.
Top Forex News: Market Sentiment on Rate Cuts
‘If the Fed needs to cut because it can, as opposed to cutting to dig the economy out of a recession, the market should perform just fine,’ Brian Jacobsen, chief economist at Annex Wealth Management in Deerfield, Illinois, told me. ‘You’re going to have markets that get impatient with the Fed if those growth numbers continue to suggest it’s cutting too late.’
Top Forex News: Dollar Index Movement
The dollar index, which measures the US currency against six others, was 0.1% higher at 104.67. It fell 1.56% in May but is up 3% on the year. It reflects increasing market expectations and financial and economic data that point to a stronger or weaker dollar.
Top Forex News: Euro and ECB Rate Cuts
Sterling slipped 0.2% to $1.27215 and the euro was slightly lower at $1.0844 ahead of Thursday’s European Central Bank policy meeting. The bank is widely tipped to announce rate cuts and markets are pricing in 57 basis points of cuts for the year.
Top Forex News: S&P Credit Rating for France
S&P on Friday slashed France by one notch to ‘AA-’, citing higher than anticipated deficits and expectations that longer-term debt would increase in the euro zone’s second-biggest economy.
Top Forex News: Japanese Yen Intervention
Data released on Friday showed that Japanese monetary authorities intervened in the foreign exchange market to support the yen nine times in the five working days from 21 March to 30 March, spending a total of ¥9.79 trillion, or $62.23 billion. It was the heaviest-ever intervention so far this year.
The yen is now the worst-performing major currency against the dollar in 2013, having lost more than 10% against the greenback in the year so far.
Top Forex News: South African Rand Movements
South Africa’s rand rose marginally Monday morning, but analysts suggest the main spur this week would be coalition negotiations following the African National Congress’s (ANC) failure to gain a majority share of the vote for the first time in three decades last week.
The moves reflect political uncertainty as for the first time since 1994, South Africa appears to have moved beyond one-party rule.
Top Forex News: Eurozone Inflation and ECB Decision
The ECB decision is the key one, but inflation data last week raised the hawkish possibility of just one more cut this year following the reduction of 25bp on Thursday. Markets price in less than 60 points of easing – effectively, two 25-basis points cuts and less than 50% chance of a third.
Top Forex News: Global Market Impact
China’s factory activity grew at the fastest pace in almost two years in May, adding to market optimism as the US Federal Reserve’s preferred measure of inflation rebounded in April.
The same rising trend in Chinese trade data positioned the world’s biggest exporter to lead economic recovery around the globe.
Top Forex News: Bank of Canada Rate Expectations
Markets also indicate about an 80% chance that the Bank of Canada will cut on Wednesday, as well as around 60 basis points of easing this year.
This expectation is part of a global rate-cutting wave, as central banks contemplate easing their monetary policies in the face of diverse economic conditions.
Top Forex News: U.S. Job Market Data
That outlook could change by the end of this week with the release of various data, beginning with key surveys of services and manufacturing, and ending with May payrolls, which are expected to add 190,000 net new jobs and hold unemployment at 3.9%.
The payroll numbers will be crucial for investors to determine the strength of the US labor market.
Top Forex News: Asian Currency Performance
Currencies were higher at the start of June with the dollar up 0.1% against a basket of peers after losing ground in May for its first monthly decline of 2024.
The worst-performing G10 currency this year, the yen, inched higher against the dollar to purchase 157.040, but held near Thursday’s four-week low of 157.715.
Top Forex News: Emerging Market Focus
Attention was on emerging markets, as India’s rupee gained and Mexico’s peso lost ground following the release of exit polls in the general elections held in the two countries this week.
Asian stocks pushed higher as stronger Chinese data fed upbeat market sentiment.
Top Forex News: Commodity Prices
Gold edged up to $2,327 an ounce, having risen four months in a row amid central bank and Chinese buying. Oil prices had fallen after OPEC+ on Sunday agreed to maintain most of its oil output cuts to 2025, although some cuts will be relaxed from October this year.
Top Forex News: Indian Rupee Outlook
The Indian rupee is due to open sharply higher on Monday, following industry exit polls that show Prime Minister Narendra Modi winning a third term.
NDFs indicated the rupee will open at 83.10-83.12 to the US dollar as against Monday’s last session’s finish at 83.4625.
Top Forex News: Election Impact on Rupee
Weekend exit polls indicated an upsurge in the tally of the prime minister’s Bharatiya Janata Party (BJP) from its 303 seats in the 543-member lower house of Parliament and the possibility of achieving a two-thirds majority.
Political continuity augurs well for macro-economic stability and the current momentum of reforms.
Top Forex News: Economic Continuity in India
Goldman Sachs observed that ‘political continuity [in India] implies a macro-economic stabilization and continues of reforms’.
The fluctuation of the rupee before the results of an election represents investor mood on the expected political stability and economic policies.
Top Forex News: Market Indicators
Traders also watch gauges such as the one-month non-deliverable rupee forward at 83.18 and the onshore one-month forward premium at 7 paise. GIFT Nifty was up 3%.
The dollar index was down at 104.54 and Brent crude futures were up 0.6% at $81.6 a barrel.
Top Forex News: Trump’s Conviction and Market Impact
And yet last week, Donald Trump became the first US president to be convicted of a felony, and Wall Street still believes that he has a good chance of winning November’s election.
Investors seem to expect that his re-election would provide some kind of broad-based support for the stock market and dollar, even at the cost of even more inflationary policies (new tariffs, further tax cuts, etc).
Top Forex News: Currency Market Reactions
Against a basket of major currencies, the dollar fell roughly 10% over Trump’s first four years, although the two years from the end of 2018 through 2020 saw the dollar rise around 15%, reflecting the short-term market assessment of what his administration’s trade policy and economic measures meant.
Top Forex News: Trade Tariffs and Currency Volatility
Modest to big tariffs under a future president Trump could be risky for the Mexican peso and Chinese yuan, but any potential tariffs on European products would make smaller European currencies vulnerable to risk sentiment.
Conclusion:
All in all, as the Top Forex breaks down, one can see that political headlines, economic data, and central bank policies are still the dominant factors that affect the prices of currencies worldwide. In the face of volatile markets, they always emphasize that knowledge and flexibility remain the keys to traders understanding the ever-changing market sentiments. Whether it is about the Fed and ECB cutting interest rates, the upcoming elections in India and Mexico, or the overall economic statistics, they all make the story.
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