Currency futures rose on Friday as the risk sentiment remained elevated, putting pressure on the safe-haven dollar. The British pound remained the top performer as the UK’s GDP showed a sigh of relief, followed by a higher-than-expected CPI reading that could result in a slight tweak to the Bank of England’s easing policy.
On Friday, the US released its manufacturing and services PMI data. The data remained better than the previous reading. However, it could not beat expectations of the market expectations, which shows a potential slowdown in the economy. The US dollar suffered a bit and dragged down to multi-week lows against rival currencies.
Monday’s markets also rejoiced in the better risk mode stemming from the results of the German elections. The victory of Merz’s alliance and AfD reveals a potential pause in the debt brake. If it happens, it could further boost the Euro.
However, the uncertainty around forming a government in Germany still hovers as no single party won a majority vote. Therefore, any delay in the process could weaken the Euro and other European currencies.
The Japanese Yen also remains strong against most counterparts as the rising inflation in Japan ignites the odds of a continued rate hike cycle. Though Monday’s markets saw the JPY struggling against the US dollar. However, the Yen’s downside remains limited.
The Australian dollar found some sell-off last week as the RBA cut the rates. However, the impact wasn’t much as the markets had already priced in the impact. Meanwhile, strong jobs data lent some support and helped the currency to rise.
The market participants now await US GDP and US Core PCE Index data. Both data remain pivotal for the markets as they set the tone for further moves.
Regarding geopolitics, the Ukraine peace deal has not yet shown any progress. The uncertainties linger, but hopes for reaching a peace agreement seem likely after Trump pressured Zelenskiy. German Chancellor also reiterated the need to negotiate the terms.
