US Dollar Weakens Against Euro and Pound as Markets Reassess Global Monetary Risks

Weekly US labor market data released yesterday delivered mixed signals. Initial jobless claims rose to 219.0K, above both the forecast of 210.0K and the previous reading of 203.0K. At the same time, the four-week average increased from 208.0K to 209.5K, while continuing claims fell from 1.832M to 1.794M, below the preliminary estimate of 1.840M.

Overall, the situation remains stable enough to keep Federal Reserve officials from moving toward monetary easing. In addition, price pressures remain elevated, with the core personal consumption expenditures index coming in at 3.0% in February, well above the Fed’s 2.0% target. If today’s inflation report confirms a further acceleration in price growth, as forecasts currently suggest, with headline inflation potentially rising from 2.4% to 3.4% year-on-year and core inflation from 2.5% to 2.7%, the likelihood of the regulator maintaining its current monetary stance will increase significantly. It is also worth noting that, according to sources cited by Punchbowl News, the Senate Banking Committee has postponed hearings on Kevin Warsh’s nomination for the position of Federal Reserve Chair. The hearings are now expected no earlier than April 21, which, given all necessary legal procedures, may prevent a leadership transition by mid-May. If Warsh is not confirmed by then, Jerome Powell will remain in charge in an acting capacity.

Eurozone

The euro is strengthening today against its main counterparts — the US dollar, the pound, and the yen.

March inflation data from Germany were released today. On a monthly basis, the consumer price index rose by 0.2% to 1.1%, while on an annual basis it accelerated from 1.9% to 2.7%. The harmonized index, meanwhile, increased from 0.4% to 1.2% month-on-month and from 2.0% to 2.8% year-on-year, respectively, due to higher energy prices amid the Middle East conflict. Even so, European Central Bank officials still hope that consumer inflation expectations will not become entrenched, which would help avoid the need for another round of monetary tightening.

United Kingdom

The pound is gaining against the yen and the US dollar, but weakening against the euro.

In the absence of major economic releases, price action is being driven primarily by external factors. It is worth noting recent comments from UK Prime Minister Keir Starmer, who said yesterday that the Middle East conflict should become a turning point for the country after two decades of crises, and pledged to strengthen the economy and national security in order to cope with a more “unstable and dangerous” global environment. Investors will also be watching February GDP data due on Thursday at 08:00 (GMT+2). A decline from the current readings of 0.0% month-on-month and 0.8% year-on-year could strengthen the case for Bank of England officials to begin easing monetary policy, which would in turn weigh on the pound.

Japan

The yen is losing ground against its major counterparts — the euro, the pound, and the US dollar.

March wholesale inflation data published today showed that the corporate goods price index rose from 0.1% to 0.8% month-on-month, slightly below the 0.9% forecast, while the annual reading increased from 2.1% to 2.4%, also below the expected 2.6%. The figures have reinforced expectations of a possible rate adjustment at the Bank of Japan meeting on April 27–28. Also worth noting are recent comments from Deputy Governor Ryozo Himino, who said monetary authorities would shape policy while taking into account the scale and duration of the “economic shock” caused by the Middle East conflict. He acknowledged that if the US-Iran confrontation continues, it will create a dilemma for the central bank, forcing policymakers to choose which problem to prioritize first — supporting economic growth or fighting price pressures.

Australia

The Australian dollar is losing ground against the euro and the pound, while showing mixed performance against the yen and the US dollar.

February labor market-related data released today were mixed. On a monthly basis, the total number of building permits issued surged by 29.7% after a decline of –7.25% a month earlier, while the same indicator for private homes slowed from 1.1% to 0.2%. Overall, the statistics point to resilience in the sector even under crisis conditions. On Thursday at 03:30 (GMT+2), traders will focus on employment and unemployment data, and a strong reading could significantly increase the chances of another rate hike by the Reserve Bank of Australia.

Oil

Oil prices remain trapped in narrow sideways ranges.

Tomorrow, investors will be watching the outcome of the first round of negotiations between US and Iranian representatives in Islamabad. At present, Tehran is seeking an end to attacks on Lebanese territory by the Israel Defense Forces, while the White House is insisting on reopening the Strait of Hormuz to duty-free shipping. Yesterday, President Donald Trump called on Iran’s authorities to “immediately stop” charging tanker transit fees. However, analysts believe that control over this key waterway will still allow Tehran to monetize cargo flows, which, according to estimates, could generate up to $64.0 billion a year and later be used for the country’s reconstruction.