Synopsis:

Credit Agricole provides its EUR/USD forecast for the next two years, outlining expectations for a decline in 2024 due to prevailing policy divergence and market dynamics around the US presidential elections. The bank also anticipates a rebound in 2025 based on projected changes in the US economic environment.

Key Points:

• Q4 2024 Forecast: Credit Agricole anticipates EUR/USD to reach 1.05 by the end of 2024, influenced by sustained policy divergence between the Federal Reserve and other G10 central banks, alongside heightened market caution due to the US presidential elections.
• Q4 2025 Projection: The bank expects EUR/USD to recover to 1.12 by the end of 2025. This forecast is based on a more aggressive cycle of Fed easing driven by a deteriorating growth outlook and slowing inflation in the US.
• Upside Risks: The main risks to this outlook skew towards a stronger USD. These include more resilient US economic fundamentals potentially spurred by ongoing fiscal stimulus, persistently high US inflation possibly driven by new tariffs, a weak dollar policy, or migration restrictions, and a less dovish or more independent Federal Reserve.

Conclusion:

While Credit Agricole anticipates a near-term decline in EUR/USD due to US-centric factors and monetary policy discrepancies, the bank expects a reversal in the dollar's fortunes as the economic conditions in the US prompt a more pronounced easing cycle by the Fed in 2025. However, the noted risks could disrupt this trajectory, potentially maintaining a stronger USD than forecasted.

• NY opened near 0.6615, pair fell sharply after US April PPI report

• Above estimate headline result fueled concerns inflation is hot again

• US yields US2YT=RR, US$ rallied sharply, AUD/USD traded 0.6578

• Buyers emerged however as yields, US$ softened & risk assets rallied

• Significant downward revision to March PPI helped buoy risk

• Stocks, gold XAU= rallied while USD/CNH fell to 7.2355

• AUD/USD climbed back above the 10-DMA, turned positive, traded 0.66275

• Pair traded up +0.17% late in the day and technicals leaned bullish

• RSIs rising, pair above slew of daily MAs, consolidation phase persists

• US April CPI, retail sales reports are major risks for Wednesday

• Below estimate results could send US$ lower and AUD/USD much higher

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• GBP$ ending NorAm by day's high, +0.2% at 1.2583; Tues range 1.2593-1.2510

• Pair initially fell post-PPI as HL data appeared strong; Mar revised lower

• Aiming higher, sterling still has key inflation tests ahead nL1N3HH1TV

• Fed's Powell uncertain on inflation path; next move unlikely a Fed hike

• U.S. CPI f/c a tad lower, w/o progress on lower inflation USD to remain bid

• Res 1.2593 Tues High, 1.2596 50% of 1.2894-1.2299, 100-DMA/May 3 high 1.2634

• Supt at 200-DMA 1.2541, 1.2510 Tuesday low, 1.2446 May 9 low

• Beyond Wed US CPI, May 22 UK CPI may hold clues to BoE policy path

• NY opened near 1.0795, hit 1.0767 on EBS after US April PPI hit the wires

• Headline number drove the spike lower but investors then looked at revisions

• Significant downward revisions erased gains for yields US2YT=RR, US$

• USD/CNH fell to 7.2355 & gold <xau+> rallied as risk sentiment improved</xau+>

• EUR/USD erased the post-data drop, turned positive, hit 1.08255 on EBS

• Remarks from Fed Chair Powell did nothing to deter EUR/USD bulls

• Rally stalled near daily cloud base, pair near 76.4% Fib 1.0885-1.0602 late

• Rising daily, monthly RSIs, move above 55- & 200-DMAs are bull signals

• April CPI & retail sales due Wed., downbeat data may sink US yields, US$

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Synopsis:

RBC maintains a stable outlook on EUR/USD, predicting strong buying interest at lower price levels. The bank anticipates that corporate and long-term investor hedging at the 1.06 level will provide substantial support, limiting downside potential for the euro.

Key Points:

• Corporate Buying Demand: European corporates and long-term investors are likely to continue showing strong buying interest in EUR/USD whenever it reaches the 1.06 level, providing a floor to further declines.
• Central Bank Actions: RBC forecasts the European Central Bank (ECB) to implement additional rate cuts in June, September, and December, mirroring expected Fed cuts, thereby influencing yield differentials but already priced into forward curves.
• Comparative Currency Impact: The expected changes in the yield gap are seen to have a more pronounced impact on currencies like the CAD, which is expected to see a widening negative yield differential with the US.
• Technical and Fundamental Outlook: RBC views any rallies towards the resistance levels of 1.0848 and 1.0977 as potential buying opportunities, with technical support positioned at 1.0681 and 1.0601.

Conclusion:

While RBC has slightly adjusted its H2 forecasts for EUR/USD downwards, the overall strategy suggests a bullish stance on any rallies to key resistance levels.

• $CAD a tad soft in NorAm, -0.12% at 1.3649; Tuesday Range 1.3691-34

• Pair drips lower after US PPI revisions hint at slowing inflation

• Canada wholesale trade downside miss tempers CAD gains

• US CPI Wednesday the main event; Rtrs consensus f/c core 3.6% vs 3.8% pvs

• Should CPI show upside surprise Fed steady, higher hike tones will lift USD

• Supt 1.3633 50% of 1.3420-1.3847, 1.3609 lwr 21d Bolli, 1.3566 the 200DMA

• Res 1.3691 Tuesday high, 1.3707 the 21-DMA, 1.3782/85 the May1/Apr 30 high area

Synopsis:

Bank of America anticipates a potential bullish breakout for EURUSD in the context of the upcoming US CPI release for April. Market sentiment is shifting towards a bearish outlook on the USD, influenced by recent changes in FX options positioning and technical indicators.

Key Points:

• Bearish USD Sentiment: There has been a noticeable shift in market sentiment against the USD, as evidenced by option skews moving towards USD puts and the unwinding of long USD positions.
• EURUSD Technical Setup: EURUSD is testing significant technical resistance levels, including the 200-day and 50-day moving averages, suggesting a potential breakout from the year-to-date downtrend.
• Inflation Expectations: Expectations for a weaker US core CPI print are setting the stage for EURUSD strength. Historical data indicates that such a pattern of consecutive upside surprises in core CPI is rare, enhancing the potential for a miss.
• Market Positioning: Current FX options positioning and technical analysis signal bullish prospects for EURUSD, especially if the CPI data underperforms market expectations.

Conclusion:

Bank of America holds a bullish view on EURUSD heading into the release of the US CPI data, citing easing concerns over persistent inflation if the data meets or falls below expectations. However, a higher-than-expected inflation figure could pose risks to this outlook, potentially reinforcing USD strength.

• USD/JPY briefly spiked up to 156.80 after seemingly hawkish PPI headlines

• But deep downward revisions then noticed and Tsy ylds and dollar backed down

• In fact, 2- & 10yr Tsy-JGB ylds spreads are lowest since April 5 & March 28

• Pullback finding a foothold on hourly kijun at 156.24 by Mon's 156.26 high

• Kijun and Mon's low are next supports at 155.91/50

• Pricing of likely Sep & Dec Fed cuts only modestly changed at 21 and 44bps

• Probabilities of BoJ rate hikes in July and Oct, beyond trend slowly higher

• Japan's wholesale inflation adding to BoJ tightening prospects

• But still wide spread between US and Japan rates and yields

• Keeps carry traders in dip-buying and bullish mode for now

• Focus now on Wed's U.S. CPI and retail sales, with Powell later today

• If the data are hawkish, 61.8% of 160.245-151.86 at 157.04 is next target

• Followed by May 1's 157.99 pre-2nd suspected intervention daily high

• Intervention threat seen most acute if 160.245 & 1990's 160.35 highs at risk

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Synopsis:

TD provides an outlook for the FX markets ahead of the upcoming April US Consumer Price Index (CPI) report. The analysis highlights concerns that recent USD selloffs, driven by technical market movements, may face challenges, indicating potential shifts in currency valuations based on divergent inflation trends and upcoming US elections.

Key Points:

• USD Performance: The US dollar ended a two-week losing streak with modest gains, suggesting a reassessment of the fundamental economic indicators influencing the currency.
• Inflation Divergence: US inflation indicators diverge significantly from those of the rest of the world (ROW), particularly the G10 countries, potentially impacting monetary policy decisions differently in the US compared to other nations.
• Election Impact on Fed Policy: The proximity of the US election introduces constraints on the Federal Reserve's policy actions, possibly limiting the scope and timing of interest rate cuts, unlike other central banks which may face fewer political constraints.
• Growth and Inflation Dynamics: While growth rates are converging globally, inflation disparities provide a rationale for continued rate divergence, supporting a stronger USD based on relative economic strength.

Conclusion:

TD anticipates that the US dollar may find support from the country's unique inflationary trajectory and economic conditions relative to other major economies. The upcoming CPI data will be crucial in testing market narratives around inflation and monetary policy, potentially influencing currency markets significantly.

Synopsis:

Goldman Sachs predicts a subtle deceleration in the US core CPI for April, projecting an increase of 0.28%, slightly below the consensus expectation of 0.3%. This forecast suggests a cooling from the 0.37% average increase observed in Q1, potentially impacting future monetary policy decisions.

Key Points:

• Core CPI Slowdown: Expected to rise by 0.28% in April, marking a slowdown from the first quarter's average of 0.37%.
• Transportation Costs: Anticipated decreases include a 2.5% reduction in airfares and a 0.8% drop in used car prices, with new car prices expected to remain stable.
• Housing Costs: Rent is forecasted to increase by 0.37%, with Owners' Equivalent Rent (OER) expected to rise by 0.45%.
• Insurance and Services: Car insurance rates are expected to decelerate to 1.6% (from 2.6% in March), while health insurance rates are projected to remain flat. Tax preparation services are expected to provide a 2bp boost.
• Energy and Food Prices: Energy prices are projected to increase by 1.7%, and food prices by 0.3%, contributing to an overall headline CPI rise of 0.37%.
• Annual Core CPI Adjustment: The forecast would lower the year-on-year change in the core CPI by two tenths to 3.6%.

Conclusion:

Goldman Sachs' analysis indicates a possible easing trend in inflation, which could reduce the urgency for aggressive monetary tightening. This mild slowdown, if confirmed by actual data, may encourage the Federal Reserve to maintain a cautious approach to interest rate hikes, balancing growth with inflation control.

USD/JPY bulls might stamp their hooves before charging towards the 160 level again if U.S. CPI data comes in hotter than expected on Wednesday.

USD/JPY rose beyond 160 on April 29 - the catalyst for the first of two rounds of suspected yen-buying FX intervention from Japan, with a sub-152 low plumbed during the second of those suspected intervention rounds on May 3.

U.S.
April CPI is forecast up 0.4% on the month, 3.4% on the year.
Core CPI is forecast up 0.3% on the month, 3.6% on the year.
The numbers will be revealed on Wednesday at 1230 GMT.

Hotter than expected CPI data could lift the dollar by reducing the perceived probability of a Federal Reserve rate cut in July or September.

CFTC data on FX positioning showed hedge funds and speculators slashed their net yen short position by 20% to 134,922 contracts, its lowest level since March, in the week ended May 7.

Related comment: nL1N3H20MN

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• Overnight expiry FXO implied volatility gains reflect Wed's CPI data risk

• Overnight EUR/USD around 12.0 Tuesday from 7.0 on Monday

• Premium/break-even now 54 USD pips from 31 USD pips in either direction

• 1-month expiry included June 12 U.S. CPI and Fed policy decision from Monday

• 1-month expiry EUR/USD implied volatility now 6.1 from 5.5 on Friday

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• Tight ranges the broader market theme ahead of U.S. PPI data

• Main events: Wed's U.S. inflation numbers and Powell speaking in Amsterdam

• EUR/USD 1.0782-93 so far with the Monday rally blunted by tight action

• A clear break of the 200-day moving average needed to bolster EUR's chances

• The average currently at 1.0791: recent highs 1.0807 and 1.0812

• ZEW numbers for May due at 0900GMT: a jump in German sentiment expected

• Reuters poll consensus for economic sentiment 46.00 vs 42.9 previously

• 1.0750 1.52 BLN and 1.0800 1.55 BLN close major option strikes for May 14th

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• FX traders have taken USD/JPY higher to break Fibo supply at 156.05

• 156.05 Fibo is a 50% retrace of the 160.24 to 151.86 2024 (EBS) drop

• Spot registered a fifth weekly close in a row above the 152.60 Fibo

• It overcame the very long-term 152.60 Fibo level back in April

• 152.60 Fibo, a 38.2% retrace of the 277.65 to 75.31 (1982 to 2011) drop

• We remain long at 155.25 for 165.00, meanwhile our stop is just below 150.00

• EUR/JPY 168.60-81 EBS range on Tuesday. USD/JPY Trader TGM2336

• Sterling looking constructive and eyes the May 3 1.2634 high

• Price closed above the 200-day MA Mon and opened clear above Tues

• The average at 1.2541 today

• The 100-day MA and daily cloud base provide bull targets

• Average at 1.2634 and cloud base at 1.2670

• Weekly action continues to hold above the weekly cloud, top at 1.2474

• Gain consolidation favoured for Tues

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• Cable nudges up towards 1.2568 on hotter than expected UK pay growth data

• Regular pay up 6.0% YY vs 5.9% forecast. Total pay up 5.7% vs 5.5% forecast

• 1.2568 was Monday's high, and May 7 peak. 1.2547 was Asian session low

• Above-forecast UK pay growth is boost for hawks opposed to BoE June rate cut

• BoE Chief Economist Pill to speak about the economic outlook at 0730 GMT

• 70 out of 108 economists polled by Reuters expect first Fed cut in September

• Off 0.05% at the base of a tight 1.0785-1.0793 range in quiet trading

• A slow session overall in Asia as markets wait for U.S. CPI on Wednesday

• ZEW economic sentiment data and economic forecasts will be interesting

• U.S. PPI followed by Federal Reserve Chair Powell talk lead event risk

• Charts - momentum studies, 5, 10, and 21-day moving averages climb

• 21-day Bollinger bands rise - daily charts sustain a positive setup

• Recent 1.0812 high and 1.0818 upper 21-day Bollinger are first resistance

• Friday's 1.0760 low and then the 1.0724 double-bottom are initial supports

• 1.0750 1.518 BLN and 1.0800 1.549 BLN close major strikes for May 14th

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Synopsis: I

NG observes a fluctuating sell-off in the British Pound, influenced by recent economic data and upcoming reports. Despite a positive surprise in the UK's first quarter GDP for 2024, ING remains skeptical about its long-term impact on the Bank of England’s policy direction.

Key Points:

• Recent GBP Dynamics: The unexpected strength in Q1 2024 GDP provided temporary support to GBP, but ING doubts this will significantly alter the Bank of England's policy outlook, which remains oriented towards easing.
• Upcoming Data: Attention now turns to the March jobs data, though the Bank of England has reduced the emphasis on this in favor of inflation metrics, particularly the April services CPI due on May 22, which is seen as crucial for determining the timing of potential rate cuts.
• BoE Commentary: Market participants are also keen to hear any new insights from BoE Chief Economist Huw Pill regarding the timing of the anticipated easing cycle.

Conclusion:

While the recent GDP figure offered some respite, the overarching sentiment towards GBP remains bearish, with expectations for continued weakness over the coming quarters. The focus remains heavily on inflation data, which will be pivotal in shaping the Bank of England's upcoming monetary policy decisions. EUR/GBP is expected to find support in the 0.8550 to 0.8575 range amid these developments.

Repeats for wider audience, adds topic codes

• AUD/USD down 0.1% in Asia but holds within 0.6580-0.6630 range

• Weak JPY and caution ahead of latest U.S. inflation data weigh

• Traders also await Australian government's annual budget due later Tue

• Budget will prioritise efforts to fight stubbornly high inflation- Treasurer

• AUD supported as RBA rate expectations diverge from those of other c.banks

• Markets pricing in around a 15% chance next RBA move in rates will be up

• Easing chances this year seen as negligible; cuts seen from Fed, ECB, BOE

• Higher metal prices provide underlying AUD support; Asia range 0.6612-0.6599

• Support 0.6585-90, 0.6560 resistance 0.6625-30, 0.6645-50, 0.6667-77

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• Steady early after closing up 0.2% as the USD fell 0.1% in a low-key session

• Yield spreads were unchanged with both 10yr bund and 10yr UST off just 2bp

• The 'Choose France' campaign attracted a record $16BLN in fresh investment

• Charts - momentum studies, 5, 10, and 21-day moving averages climb

• 21-day Bollinger bands rise - daily charts maintain a positive setup

• The recent 1.0812 high and 1.0818 upper 21-day Bollinger likely cap in Asia

• Friday's 1.0760 low and then Thursday's 1.0724 base are initial supports

• 1.0750 1.518 BLN and 1.0800 1.549 BLN close major strikes for May 14th

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Repeats for wider audience

• AUD/USD consolidation in 0.6580-0.6630 range to continue as risk events loom

• RBA rate expectations diverge from those of other major c.banks, supports

• Higher-for-longer RBA rate stance will continue to limit AUD downside

• Copper climbs towards two-year peak, Dalian iron ore gains 2%, underpin AUD

• Australia budget, US PPI Tue; Powell participates in a moderated discussion

• Support 0.6585-90,0.6560 resistance 0.6630, 0.6650; Mon range 0.6586-0.6629

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• USD/JPY rose 0.28% having cleared 156.05, 50% of its 160.245-151.86 plunge

• So far modest breakout was catalyzed by NY Fed survey's higher inflation

• Tues's US PPI and Wed's CPI & retail sales are hard data tests for Fed, USD

• The last new y/y low in CPI was 3.0% in June 2023; April f/c at 3.4% vs 3.5%

• Fed still favored in futures to cut by Sep, 43bp by year-end

• BoJ swaps have a 10bp hike in July. 23bp by year-end: up after QE cut Monday

• JGB yields on slow, but steady rise this year as Fed cut pricing swings

• Close above 158.28 May 2 high would be bullish and eye 61.8% at 157.04

• The May 1 high by 158 is the next pivot point if US data are supportive

• MoF directed intervention possible in a rapid rise toward 2024/1990 peaks

• If US data prove dovish, props are at 155.50 and by 150

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Synopsis:

Credit Agricole provides an analysis of the EUR/CHF exchange rate, predicting a steady  0.97 to 1.00 range through the end of the year influenced by both domestic and international factors.

Key Points:

• Current Stability: EUR/CHF has stabilized around 0.9750, influenced partly by a surprising rise in Swiss CPI in April and a relatively calm domestic news flow.
• Limited Domestic Impact: Upcoming events in Switzerland, including remarks from SNB President Thomas Jordan and expected producer price index data, are not anticipated to significantly influence the CHF.
• Global Influences: The Swiss Franc is expected to be more responsive to international events, particularly the impact of the US CPI data on global equity and interest rate movements.

Conclusion:

While domestic factors provide limited impetus for significant movements in the CHF, international dynamics, especially from the US, could impact the currency pair. Credit Agricole reaffirms its forecast for EUR/CHF to remain within a 0.97 to 1.00 range in the coming months, suggesting a continued period of relative stability barring major global economic shifts.

• GBP$ firm into NY close, +0.28% at 1.2558; NorAm range 1.2569-33

• Pair anchored by 200-DMA at 1.2542, capped Monday by May 7 high 1.2569

• UST yields trickle lower, GBP shorts lightening as dovish Fed tones rise

• Wednesday's U.S. CPI, May 22's UK CPI key events as policy paths evolve

• Beware misleading moves as sterling eschews extremes nL1N3HG178

• GBP$ res at 1.2569, 55-DMA at 1.2603, May 3 trend high at 1.2634

• Close above 1.2596, 50% Fib of 1.2894-1.2299 shifts momentum to bulls

• Support at Monday low 1.2518, Daily base line 1.2504, May 9 low 1.2446