The U.S. dollar fluctuated on Monday. How is the euro faring?
The dollar gained at the beginning of today’s session. However, the currency changed the course later, shaving off some of those gains. Traders are waiting for hints about the U.S. Federal Reserve’s future policy. However, OPEC+ made an announcement that will influence the market.
On Sunday, the Organization of the Petroleum Exporting Countries, also known as OPEC, and its allies made a statement that bolstered the oil prices. OPEC+ intends to deliver oil production cuts. This isn’t the first time the organization has cut production, but the oil prices still skyrocketed by approximately 8% in early trade in Asia today. Brent crude soared by 5.1%. It was trading at $84 per barrel at last.
Investors expected OPEC+ to maintain its cuts at the current level (2 million barrels per day) until the end of this year. However, the organization announced it would deliver additional output cuts, decreasing the production by around 1.16 million bpd.
Mohamad Al-Saraf, Associate FX and Rates Strategy at Danske Bank noted that oil prices might continue rallying in the near future. In such a case, global inflation will likely increase again. If the banking turmoil continues as well, then the traders will focus on the inflation outlook again.
Meanwhile, the U.S. dollar declined after surging forward when the news first surprised the markets. As safe-haven currencies, it usually gains during uncertainty. But investors’ attention turned to the central banks’ policy later in the session, and the dollar started declining.
On Friday, new data showed that core price growth accelerated in the eurozone. Economists think that the European Central Bank might decide to deliver more rate hikes based on this data. At the same time, in the United States, a measure of core inflation came at 4.6%, a bit lower than analysts expected.
What do the analysts say?
Niels Christensen, the chief analyst at Nordea, stated that interest rate differentials influence the EUR/USD pair currently. Last week’s data should support the ECB’s hawkish policy. Thus, it was surprising to see the common currency trading in the red on Monday morning.
The dollar index plummeted by 0.4% at 102.49 against a basket of six major currencies on Monday. Meanwhile, the euro dropped to a one-week low, exchanging hands at $1.0788 earlier in the session. The currency rebounded later, though, climbing up by 0.2% to $1.0865 at last. The British pound also rose by 0.2% during this session. It traded at $1.2357 on Monday. But the greenback edged up by 0.1% versus the Swiss franc.
This week, traders will focus on U.S. activity data, as well as the jobs report due on Friday. Many markets will stop trading for the Easter holiday at the end of the week, though. Nordea’s Christensen noted that if the U.S. data comes out strong, market participants might change their rate hike expectations. The greenback could get some support in that scenario.
In Asia, the Australian dollar jumped by 0.6% to $0.6724. Investors are waiting for the Reserve Bank of Australia’s policy meeting on Tuesday. According to the polls, there’s about an 85% chance that the central bank will maintain its current interest rates without adding new ones.
The Japanese yen declined today. The greenback added 0.3% to 133.23 yen after skyrocketing to its highest peak since March 17 in the previous session. Moreover, oil-sensitive currencies rallied, bolstered by rising oil prices. Both Norway’s krone and the Canadian dollar traded in the green today.
What about the EM currencies?
Most emerging Asian currencies ended in the bearish territory on Monday. The Thai baht and South Korean won struggled the most. The Thai baht plunged by almost 1.2%, while the South Korean won tumbled by as much as 1.5% during this session.
In emerging Asia, the won is currently the worst-performing currency. It has declined by almost 4% over the last year. The Philippines peso, Malaysian ringgit, and the Singapore dollar also decreased between 0.2% and 0.5%.
Factory activity data from Asia were weaker than analysts expected, adding to the pressure on Asian markets. Some economists think that it might point to a possible economic recession in the region. That news weighed on the market sentiment.
However, in Indonesia, inflation dropped to its lowest level in seven months in March. The prices increased much slower than usual. Markets in Taiwan weren’t trading due to a public holiday.
