United States of America

USD has ambiguous dynamics with EUR and GBP but is strengthening against JPY.

Investors are focused on the publication of preliminary data on US gross domestic product (GDP) for Q1 2024, which turned out to be much weaker than expected: the American economy grew by only 1.6% against preliminary estimates of 2.5% and Q4 2023 figure of 3.4%. The deterioration of the dynamics was contributed by the decline in consumer spending and private investment, although the volume of public investment continued to increase. Market participants were most alarmed by data on consumer prices, which increased by 3.4% in the first quarter, while in the previous period the figure was only 1.8%. Thus, a serious increase in inflation persists even with a noticeable slowdown in the economy, which gives the US Federal Reserve new arguments for maintaining interest rates at current levels. Also today, weekly data from the labor market were published: the number of initial jobless claims increased by 207.0 thousand, being less than both the forecasts of 214.0 thousand and the previous figure of 212.0 thousand, and the total number of citizens receiving assistance from the state decreased from 1.796 million to 1.781 million instead of the expected increase to 1.814 million. Thus, the labor market remains stable, which also reduces the likelihood of a monetary policy adjustment soon.

Eurozone

EUR is weakening against GBP, strengthening against JPY and has ambiguous dynamics against USD.

Today, data on the consumer climate index in Germany from the analytical portal Gfk Group for May was published: the indicator increased from -27.3 points to -24.2 points, with expectations of -25.9 points. Positive dynamics were observed for the third month in a row, confirming increased optimism among German households. The expected income index also increased from -1.5 points to 10.7 points, and the willingness to pay index increased from -15.3 points to -12.6 points. This data allows experts to hope for a speedy recovery of the German economy, which is currently in a state of recession. It is also worth noting comments from European Central Bank (ECB) board member Isabel Schnabel, who today said that the return of consumer prices to the 2.0% target could be "uneven" and that falling productivity along with high service costs represent some of the biggest risks contributing to rising inflationary pressure.

United Kingdom

GBP is strengthening against EUR and JPY but has ambiguous dynamics against USD.

Today, April data on the index of changes in retail sales volumes from the Confederation of British Industry (CBI) was published: the indicator decreased dramatically from 2.0 points to -44.0 points, with preliminary estimates of a decrease to -2.0 points. Thus, the current month has become the worst for retailers since the spring of 2020, when the coronavirus pandemic began in the UK. However, CBI experts believe that the decline in sales is due to the earlier timing of Easter this year, so retail sales may recover again in May.

Japan

JPY is weakening against its main competitors – USD, EUR, and GBP.

It is worth noting that the value of the US dollar remains around 155.00, which may cause foreign exchange interventions by the Japanese government to stabilize the national currency. Market participants are also preparing for tomorrow's Bank of Japan (BoJ) meeting. It is expected that the regulator will keep the key rate at 0.10%, but at the same time confirm the forecast for inflation growth in the country above 2.0% for the next three years. This will signal to the market that officials are ready to continue increasing borrowing costs in the medium term. However, the BoJ head, Kazuo Ueda, is likely to state the need to avoid hasty steps when making further monetary decisions and will call for action based on available economic data.

Australia

AUD is strengthening against GBP but has ambiguous dynamics with EUR, JPY, and USD.

Today, financial institutions in Australia are closed and investor activity is reduced. On Friday, market participants expect the publication of data on the producer price index (PPI) for the first quarter: it is expected that the indicator will decrease from 0.9% to 0.6% QoQ, and from 4.1% to 2.6% YoY. Thus, wholesale inflation could significantly slow growth, which is a signal in favor of interest rate cuts by the Reserve Bank of Australia (RBA). However, most experts still believe that officials will adjust monetary policy no earlier than the fall of this year.

Oil

Oil prices today have mixed dynamics and continue to trade in narrow ranges.

The market is pressured by the publication of weak data on US GDP, but a significant decline in prices is prevented by a significant reduction in reserves of American oil and petroleum products. Let us recall that in the first quarter of this year, the US economy grew only 1.6%, which turned out to be noticeably less than the expected increase of 2.5%. These efforts raise investors' concerns about a possible decline in energy demand. At the same time, data from the US Energy Information Administration (EIA) report turned out to be positive: commercial oil inventories decreased by 6.368 million barrels instead of the expected increase of 1.600 million barrels, while gasoline inventories decreased by 0.634 million barrels and only distillate inventories increased by 1.614 million barrels.