USD

The latest US PCE price index, released on Friday, followed a familiar pattern among recent global inflation updates. Annual headline inflation dipped to 5% (from 5.3%). Core inflation reflected a shallower improvement, dropping to 4.6% from 4.7%, which has been the case elsewhere of late. Given that the Fed’s inflation target remains at 2%, lingering concerns remain over whether the Fed will feel comfortable enough to pause its cycle of ongoing rate hikes moving forward. However, inflation is far more likely to decline faster now that it is clearly moving below the Fed’s policy rate, so there remains genuine hope. Quarter-end flows may have ensured that the dollar bounced from the recent low by the close on Friday, but the dollar index (DXY) still declined by around 0.4% on the week. That represented the fifth straight week of declines for the dollar. 

EUR

Euro area Harmonized inflation data is following a similar path to that of the US. Annual CPI dipped from 7.1% to 6.9%. However, core inflation remains at a record, around 5.7%. Lower energy prices are helping to impact the headline, although those sticky core prices remain a concern for the ECB. This should ensure that the ECB remains hawkish on rate hikes in the future, which could help to underpin the Euro as they continue with their ongoing battle against inflation. While quarter-end flows may have taken some shine away from the recent EUR/USD rally, the pair still managed to finish over 0.6% higher last week.

GBP

Although recent data has reflected more robust growth in the UK, with GDP increasing by 0.1% over the past month, higher interest rates are creating a meaningful negative impact on the property market. Indeed, UK House prices just witnessed their biggest fall since 2009, slipping by 3.1% during March. According to a key UK lender, Nationwide, that was the seventh straight month of declines. The pound remains in an upward trajectory, with GBP/USD rising by 0.8% over the past week. 

JPY

The latest Japanese Tankan survey slipped to 1 over the year's first quarter, despite expectations for a dip from 7 to around 3. The data highlights how manufacturing sentiment has fallen to its worst level in over two years, wiping out the service sector's improvement. Corporate inflation expectations also increased sharply over the period. The recent exodus from safe-haven assets as markets calm after the banking wobbles has also helped to ensure an ongoing weaker Yen. USD/JPY rallied by around 1.75% over the week, with EUR/JPY up by an impressive 2.4%. 

CAD

Canadian growth exceeded estimates over the past month, rising by 0.5% after previously declining by 0.1%. That follows a solid Canadian Retail Sales report during the prior week, which is helping to question the BoC’s ongoing decision to pause rate hikes. USD/CAD had its biggest week of decline since November, slipping by over 1.6%. Today’s unexpected announcement from OPEC+ that they intend to cut production amidst falling demand has also helped to drive Oil prices sharply higher, which further boosts the resurgent Loonie.

MXN

It has been a reasonably spectacular few weeks for the Peso, with USD/MXN slipping by a combined 4.4% over the period and erasing all of the dollar’s previous gains. This move came despite a smaller rate hike of 0.25% from Banxico, the Mexican central bank, last week. However, with relative political stability, sound economic output, and high-interest rates of 11.25%, international flows keep being directed toward Mexico, helping underpin the Peso. 

BRL

With risk appetite increasing, emerging market currencies have witnessed strong inflows over the past two weeks. USD/BRL mirrored this development, slipping by over 3.25% last week as the Real surged. Assuming that calm backdrop continues, we could see further Real appreciation moving forward.