Published: 26/04/2023 By ECAPSterling retraced part of its losses this morning as bears took a breather after cheering yesterday’s slump against the U.S. Dollar. That said, the major central banks’ attempts to restore market confidence by curtailing US Dollar operations, seems to have put a floor under the currency pair’s pricing. The world's top central banks are cutting the frequency of their dollar liquidity operations with the US Federal Reserve from May. Ultimately, many analysts are starting to think that this move sends the clearest signal yet: that last month's financial market volatility is essentially over.
The Euro held its ground against a basket of currencies after the forward-looking German GfK consumer sentiment index came in at -25.7 for May, an improvement from the revised prior reading of -29.3, and the seventh increase in a row. Sentiment is back on track to recovery after a slowdown last month, but the values still remain below the pre-pandemic level of about three years ago. However, on a more positive note, income expectations are also up for the seventh consecutive month, returning to pre-Ukraine war levels for the first time. Ultimately, the continuous positive developments coupled with the hawkish stance of the European Central Bank supports the Euro’s recent gains and limits major adverse movements.
The US dollar edged lower in early European trade this morning, handing back some of its sharp overnight gains which were prompted by continuing concerns about an economic slowdown and the health of the US banking system. The Dollar Index traded 0.3% lower at 101.33, after posting a 0.5% gain in the previous session. Additionally, softer-than-expected consumer confidence data, falling to a nine-month low, also raised fears that the US economy, the major global growth driver, is heading towards recession in the second half of the year. Attention is now firmly fixed on the US growth and inflation data due later this week, ahead of next week’s Federal Reserve policy-setting meeting.