News & analysis

A softening in US inflation pressures this week extended the relief rally in markets as short-term interest traders became more confident the Fed could cut more than once this year. That said, the market optimism was restrained relative to recent disinflationary periods. While this could partly be a result of previous failed attempts to price Fed rate cuts, we think it is more to do with the limitations over the Fed’s easing cycle this year, especially as the level of inflation remains high.

With limited US data due out until the end of the month, this should keep most major currency pairs in tight ranges until June. That said, however, next week holds some key data outside of the US, which should determine the pace and timing of the easing cycles in Europe, Canada, and New Zealand.

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Authors: 

Simon Harvey, Head of FX Analysis

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst

 

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