The dollar’s modest sell off on Friday has extended in the past two trading sessions due to a combination of weak US inflation data and a rebound in European economic growth. GBP/USD is back above 1.30 for the first time since 23 April while EUR/USD has hauled itself above 1.12.
US core PCE inflation – which the Fed closely monitors – fell to a 13-month low of 1.6% yoy in March and markets are now pricing in a full 25bp Fed rate cut by end-year. Meanwhile there was better news in Europe, with GDP growth doubling to 0.4% qoq in Q1, based on preliminary data, and the unemployment rate falling to 7.7% in March – its lowest level since the great financial crisis.
