US Dollar Weakens Against Euro, Pound and Yen as Markets Await Labour Data

The day before, US President Donald Trump stated on the Truth Social network that he was suspending Operation Freedom, aimed at escorting commercial vessels out of the Strait of Hormuz blocked by the Islamic Revolutionary Guard Corps (IRGC), due to significant progress in consultations with Iranian authorities on the final plan to end the Middle East conflict.

At the same time, he stressed that the country would face much more intense attacks than before if it did not agree to resolve the existing disagreements peacefully: according to Axios, Washington expects responses from Tehran within 48 hours on several points of the peace initiative, which will form the basis of a bilateral memorandum. Investors are hoping for a rapid change in the situation and are actively moving away from traditional safe-haven assets, increasingly focusing on macroeconomic statistics.

Thus, on Friday at 14:30 (GMT+2), their attention will turn to the labour market report: if it does not show weakness, and forecasts point precisely to this scenario — unemployment is likely to remain around 4.3%, while employment may increase by 73.0 thousand — the positions of those within the US Federal Reserve who support keeping the current monetary policy in place for a prolonged period will strengthen significantly. It is worth noting that the latest economic data confirmed the stable condition of the national economy, which also does not favour a return to a dovish cycle. Thus, the S&P Global Services PMI adjusted from 49.8 points to 51.0 points in April and returned to the “green” zone, while the composite indicator rose from 50.3 points to 51.7 points. Meanwhile, the number of job openings declined from 6.922 million to 6.866 million, but not as sharply as experts had expected (6.860 million).

Eurozone

The euro is losing value against the yen, strengthening against the US dollar, and showing mixed dynamics against the pound.

Today, April business activity data for the eurozone countries were published and were generally weak: in the services sector, the indicator fell from 50.2 points to 47.6 points, not as much as experts had expected (47.4 points), but still entered the stagnation zone, while the composite indicator declined from 50.7 points to 48.8 points instead of 48.6 points. A similar situation developed in the EU’s largest economy, Germany, where the indicators adjusted from 50.9 points to 46.9 points and from 51.9 points to 48.4 points, respectively. The dynamics are slowing under pressure from weak domestic demand and falling export volumes. Also worth noting are the latest comments from European Central Bank (ECB) Executive Board member Piero Cipollone, who stated today that the likelihood of an interest rate hike has increased significantly amid accelerating inflation.

United Kingdom

The pound is losing ground against the yen, strengthening against the US dollar, and showing mixed dynamics against the euro.

Market participants and forex traders are focused on April business activity data: in the services sector, the indicator rose from 50.5 points to 52.7 points, exceeding the expected 52.0 points, while the composite indicator increased from 50.3 points to 52.6 points against 52.0 points, pointing to an economic recovery, even despite the energy crisis. Combined with high inflation — in March, the annual consumer price index rose from 3.0% to 3.3% — this significantly increases the likelihood of a further rise in borrowing costs by the Bank of England. It is also worth noting the latest statements from the British Retail Consortium (BRC), according to which the Middle East conflict is increasing companies’ costs for energy, production, and product delivery, in addition to employer tax indexation and wage growth. Against this backdrop, BRC representatives called on the government to support the retail sector; otherwise, maintaining prices acceptable to consumers will become extremely difficult.

Japan

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

Today is a public holiday in Japan, so financial institutions are closed and investor activity is reduced. Nevertheless, the national currency has strengthened significantly, which may once again indicate interventions by the government. There is no official confirmation of this, but experts believe that officials continue to buy the yen in an attempt to support its exchange rate.

Australia

The Australian currency is strengthening against the US dollar but weakening against the yen and showing mixed dynamics against the pound and the euro.

Market participants are analysing comments from Prime Minister Anthony Albanese, who stated today that the government will allocate 10.0 billion Australian dollars to increase national reserves and create a permanent state fuel reserve. According to him, the current 264.0 million gallons should be enough for at least 50 days, which will protect the country from future supply disruptions. It should be recalled that Australia imports around 80.0% of its energy resources and has been experiencing a local resource shortage since the beginning of the Middle East conflict.

Oil

Oil prices are correcting downward today amid emerging hopes among market participants for a swift end to the US-Iran conflict, which US President Donald Trump hinted at the day before by cancelling the implementation of the Strait of Hormuz mission called Operation Freedom. Nevertheless, experts emphasise that restoring stable shipping and supply chains through this key artery will require at least six months.

It is also worth noting that a more rapid downward movement is being restrained by the publication of the weekly inventory report from the American Petroleum Institute (API), according to which volumes fell by 8.100 million barrels, much more significantly than previously expected (2.800 million barrels).