FX.co ★ Amidst Rate Cut Uncertainty, Dollar Edged Lower Last Week

During the week ending April 26, the U.S. Dollar experienced a mixed performance due to economic data revealing uncertainties about the Federal Reserve's potential easing cycle and a volatile geopolitical situation in the Middle East. The dollar slipped against the Euro, British Pound, and Australian Dollar while it strengthened against the Japanese Yen. The Dollar Index, which measures the currency's strength against six other currencies, showed a slight decrease.

The Dollar Index decreased by 0.03% over the week, from 106.12 on April 19. Despite reaching a weekly high of 106.39, it fell to a weekly low of 105.42 by Friday.

On Tuesday, unexpected declines were shown in the U.S. Manufacturing and Service PMI data for April. On Thursday, it was revealed that first quarter U.S. GDP growth declined to 1.6% from 3.4%, falling short of market growth expectations of 2.5%.

Data further showed an acceleration in the price index for personal consumption for the first quarter of 2024 increasing from a previous quarter increase of 1.8% to a 3.4% annualized rate, stirring uncertainty over potential rate cuts. Initial jobless claims also unexpectedly dropped from 212,000 in the previous week to 207,000 in the week ending April 20, reflecting a strong labor market and dampening rate cut expectations.

The annual PCE Price Index increased to 2.7% in March from 2.5% in February. However, despite market expectations of a decline to 2.6%, the core component remained at 2.8%.

Owing to softer-than-expected PMI and GDP readings, the EUR/USD pair rallied 0.36% in the week ending April 26, climbing from a low of 1.0623 to a high of 1.0754.

GBP/USD also saw a rise of close to 1% during the same week amid a weaker dollar. The Australian Dollar saw a 1.81% jump against the U.S. dollar prompted by a higher-than-expected CPI reading.

The Dollar, however, rallied against the Japanese Yen in the backdrop of a dovish monetary policy outlook from the Bank of Japan. It's expected that the Federal Reserve will maintain current interest rates, only making policy changes by September.

The Dollar Index is currently near 105.80, with the EUR/USD pair at 1.0701, GBP/USD at 1.2523, AUD/USD at 0.6555, and USD/JPY at 156.47, amidst suspected currency intervention by the Japanese Ministry of Finance.