The weakness in the US dollar, and ongoing Euro strength, is pushing EUR/USD ever higher as markets continue to price a closing of interest rate differentials between the two major currencies. While the US may well have finished hiking interest rates, the ECB remains on course to hike again as inflation remains doggedly high in the Euro Area. Looking further ahead, market expectations are for the Federal Reserve to start lowering interest rates in September this year while the ECB is likely to be on hold, closing the rate differential further.
US INTEREST RATE PROBABILITIES
Later today we have the final US non-manufacturing PMI reading with the market forecasting a fall to 54.5 in March from a prior month’s 55.1. The service sector contributes around 78% of US GDP. On Bank Holiday Friday the latest US Jobs Report (NFP) is released into what will be a quiet market. This report has the potential to move the US dollar and will gather more interest than usual after this week’s JOLTs report showed job openings falling by more than expected to 9.931 million in February compared to a revised 10.563 million in January.
EUR/USD is trading in a tight range today, with the upcoming long weekend likely to weigh on turnover. The pair are back in an upward channel and close to the 1.10330, multi-month high that was made on February 2nd. Above here there is little in the way of resistance before the March 31st, 2022 high comes into focus at 1.11855.
EURUSD DAILY PRICE CHART – APRIL 5, 2023
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