Euro rises broadly today, lifted by significant improvement in economic sentiment indicators from Germany and the broader Eurozone. Despite these positive signals, current situation assessment remains subdued. While the worst may be over for Germany’s economy, in particular the manufacturing sector, recovery is still in its nascent stages and further nurturing is required. The uptick in Euro is more likely a corrective move rather than a definitive trend reversal, given the overall weak momentum of the common currency.

Sterling is ranking as the second strongest performer for the day, next to Euro. The Pound largely overlooks the uptick in UK unemployment rate. Market focus remains on the persistently high wage inflation. Current conditions suggest it is still premature for BoE to consider interest rate cuts, as wage pressures do not yet show signs of significant easing.

On the other hand, commodity currencies are trading lower across the board, with Canadian Dollar facing renewed selling pressure following reports of continued slowdown in core inflation measures. Meanwhile, Dollar, while maintaining strength against commodity currencies and Yen, is showing signs of fatigue against Europeans. Yen finds itself in a middling position, largely uninspired by Japan’s tepid verbal intervention.

Daily digest market movers: Gold price drops as robust US Retail Sales fuel stubborn inflation outlook

-Gold price slides to $2,370 while attempting to recapture new all-time highs around $2,430. Sheer strength in the US Dollar and US bond yields have been acting as a barricade to Gold. The appeal of the US Dollar strengthens and bond yields rise further as robust Retail Sales data for March has deepened the uncertainty about when the Federal Reserve will start lowering its key interest rates.
-The US Retail Sales data for March, released on Monday, indicated a strong demand despite US interest rates remaining higher. The monthly Retail Sales increased by a sharp 0.7%, more than the 0.3% rise expected. Retail Sales in February were revised higher to 0.9% from 0.6%. Retail Sales data is one of the leading indicators of consumer spending, which accounts for more than two-thirds of the US economy. Higher Retail Sales suggest demand from households remains strong, a factor fueling inflation.
-Strong Retail Sales data, combined with robust labor demand and a higher-than-expected Consumer Price Index (CPI) data, has forced traders to unwind expectations for early Fed rate cuts. The CME FedWatch tool shows markets are pricing in that interest rates will remain unchanged in the range of 5.25%- 5.50% in the June and July meetings. The Fed is now anticipated to pivot to rate cuts in September.
-Meanwhile, fears over Middle East tensions spreading beyond Gaza keep the safe-haven demand strong. Investors worry about a further escalation in the Israel-Iran tensions after Israel’s military Chief of Staff Herzi Halev said they would respond to Iran’s attack on their territory, in which hundreds of drones and missiles were fired, AlJazeera reports. US President Joe Biden said it won’t support the counterattack from Israel.

JEROME POWELL USA 🇺🇸 FED CHAIRMAN KEY POINTS

Fed Chair Jerome Powell said the U.S. economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said during a central banking forum.

Prepared by: Mr.SAM KIMA, Senior Vice President