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1. Over the past month, the dollar displayed a mix of strength and vulnerability against the its G10 currency peers. It initially surged above 105, driven by optimism from strong ISM services data and favorable unemployment claims, while eurozone economic concerns weighed on the euro. Speeches by FOMC members hinted at a cautious approach to balancing inflation and economic growth. Additionally, the currency continued to strengthen, propelled by elevated CPI, PPI, and retail sales figures, although sentiment surveys pointed to economic pessimism. It maintained its strength as the US FOMC signaled a hawkish rate pause. Despite weakening consumer sentiment, GDP, and PCE price index, the currency ended the month above 106 due to rising 10-year treasury yields.
2. The Euro faced challenges against the US dollar in the past month. It initially declined below $1.07 due to disappointing services PMI data and uncertainty surrounding the ECB's rate hike decision. Economic sentiment remained pessimistic, and even a surprise 25bps rate hike by the ECB couldn't prevent the Euro from weakening further. In the final part of the month, the Euro extended its decline, closing below $1.06 as regional inflation cooled. While German and Spanish CPI met expectations, Eurozone flash CPI estimates fell below market expectations, signaling potential challenges for the Eurozone ahead. 3. The pound sterling faced a challenging month against the US dollar as it slid below $1.25 when BOE Governor Bailey reiterated a dovish stance, despite market expectations of interest rate hikes due to rising oil prices. Labor market and GDP data were closely watched. Due to a contraction in GDP and labor market indicators suggesting easier monetary policy, it led to an extended decline in the sterling. CPI cooled to 6.7%, surprising the market, and the BOE announced a rate pause, with the bank rate at 5.25%. Retail sales and services PMI indicated sectoral weakness. Despite stronger realized sales figures, reports on the current account revealed a significant deficit. However, optimism was underpinned by higher Business Investment and Net Lending to Individuals.
4. The Japanese Yen faced challenges, declining below 148 against the US dollar due to monetary policy differences. Household spending decreased by 5%, impacting domestic consumption. The BOJ maintained its easy monetary policy. Despite initial strength, the Yen closed at 147.80 as policy normalization prospects dimmed. National core CPI rose to 3.1%, but the BOJ kept its policy rate at -0.10%, citing the need for sustainable inflation. Yen weakening continued as unemployment rose, CPI lowered, and consumer confidence decreased, challenging its stability below 150 levels amid expectations of a stable BOJ policy and increased money supply.
5. The aussie faced headwinds last month, primarily due to disappointing economic data, closing below $0.64 against the US dollar. However, it rebounded toward the end of the month, buoyed by robust employment data and the RBA’s monetary policy stance. The focus shifted to the upcoming unemployment rate and employment change data. The loonie demonstrated notable strength last month, strengthening against the US dollar following strong manufacturing sales data. Market attention turned to Canada's crucial CPI (CPI) figures, which proved stronger than expected. The CPI data shed light on the direction of the BOC's future interest rate decisions. The kiwi had a comparatively lackluster month, with performance influenced by a lack of impactful economic news. However, optimism emerged as GDP figures exceeded expectations, pulling the country out of a technical recession. Attention shifted to the release of quarterly GDP figures and the RBNZ rate decision.
6. Gold faced a decline over the past month due to a strengthening US dollar and positive US economic data, resulting in a nearly 1.57% drop in its price. It rebounded briefly in the second week but ended the month relatively flat. The outlook for gold appears bearish, with higher US interest rates and a growing optimism in the global economy putting downward pressure on its value. Gold closed at $1848.81 by month-end.
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