Forex Market Analysis: April

30

APRIL, 2018

AK Equity Group

The U.S. dollar continued its strength past key resistance levels against several currencies as recent economic data out of the U.S. has been better than expected and appeared quite robust. On the contrary, economic data out of the Eurozone and Britain has been consistently weaker than expected, potentially slashing rate hike expectations from the Bank of England in May.1 The dollar strength may continue its climb in the short term, but some analysts are predicting longer term weakness.2

The Canadian dollar may continue its strength as Bank of Canada Governor Stephen Poloz stated last week before the Senate banking committee that economic data was “finally positive” and that interest rates would rise from current levels, but at a sustainable pace to mitigate financial stability risks. The BoC maintained its interest rate at 1.25%.3

The Bank of Japan continued to maintain its monetary policy but eliminated its inflation target timeframe, with Governor Haruhiko Kuroda stating the necessity in doing so to prevent market speculation on additional easing each time it has done so for reaching its inflation goal. Due to weak inflation, the BoJ has pushed back its target inflation date six times and we may continue to see weakness in the Yen.4

Sources:

  1. Sterling slides after GDP data dashes rate hike expectations, Tom Finn, https://www.reuters.com/article/uk-britain-economy-markets/sterling-slides-after-gdp-data-dashes-rate-hike-expectations-idUSKBN1HY0Z3
  2. Dollar turns positive for 2018 ahead of Fed meeting, Tommy Wilkes, https://www.reuters.com/article/us-global-forex/dollar-turns-positive-for-2018-ahead-of-fed-meeting-idUSKBN1I22KB
  3. Bank of Canada says economy ‘finally positive’, rates to rise, Reuters, http://www.cbc.ca/news/business/poloz-senate-bank-economy-1.4635747
  4. USD/JPY – Japanese Yen Dips, BoJ Removes Inflation Timeframe, https://www.marketpulse.com/20180430/uusdjpy-japanese-yen-dips-boj-removes-inflation-timeframe/

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