On Thursday, April 17th, Joachim Nagel, a member of the European Central Bank Governing Council and President of the Bundesbank, stated that it is currently inappropriate to provide forward guidance on the future interest rate path, as policymakers still need to retain flexibility. Speaking during the International Monetary Fund's spring meetings, Nagel pointed out that policymakers do not yet have sufficient information to determine whether the surge in energy prices will keep inflation elevated for an extended period, an outcome that might necessitate a policy response. He said, "We need to keep our options open; it is not yet the right time to pre-commit to an interest rate direction." The European Central Bank is scheduled to hold its monetary policy meeting in two weeks. Market participants widely expect the deposit rate to remain unchanged, but under the current circumstances, policymakers have not ruled out the possibility of a rate hike. Nagel also noted that due to the impact of the US-Israel conflict with Iran, Germany's economic growth momentum has significantly weakened. This year's economic growth rate is expected to be about 0.3 percentage points lower than previous forecasts. Previously, the Bundesbank had projected economic growth of 0.6% for 2026.
Furthermore, on April 16th, Andrew Bailey, Governor of the Bank of England, who was attending the IMF spring meetings in Washington, said in a media interview that faced with the energy price shock triggered by the Iran conflict, the Bank of England would "not rush to judgment" regarding interest rate hike decisions. According to media reports, Bailey explicitly stated in the interview that the rise in oil and gas prices would "undoubtedly" feed into overall price levels. However, due to the interplay of multiple uncertainties, making decisions on interest rates has become "very, very difficult" at present. Bailey further explained, "There are indeed some very difficult judgments to be made. We will not rush to conclusions on these issues because there are many uncertainties – not only about how the situation will evolve but also about how these changes will transmit through and affect the UK economy." Market analysts indicated that Bailey's remarks were intended to cool the market's aggressive expectations for interest rate hikes. Back in March, when the Bank of England decided to keep rates steady, Bailey had warned that market expectations for subsequent hikes were an "overreaction" and "getting ahead of themselves."
Key data to watch today include the Eurozone's seasonally adjusted trade balance for February and Canada's housing starts for March.
US Dollar Index The US Dollar Index experienced consolidation yesterday, recording a slight gain on the daily chart. The spot price is currently trading around 98.20. Besides short covering and technical buying interest near the 98.00 level providing some support, the overall positive US economic data released during the session also contributed. Additionally, the significant remaining differences in US-Iran negotiations offered some support to the index. Today, focus is on resistance near 98.70, with support found around 97.70.
EUR/USD The Euro moved lower yesterday, closing slightly down on the day. The spot price is currently trading around 1.1780. Profit-taking exerted some downward pressure, and the US Dollar Index stabilizing and finding support from factors like positive economic data also weighed on the pair. However, better-than-expected CPI data from the Eurozone during the session limited the extent of the pullback. Today, attention is on resistance near 1.1850, with support around 1.1700.
GBP/USD The British Pound declined yesterday, closing slightly lower. The spot price is currently trading around 1.3520. Apart from profit-taking and technical selling pressure near the 1.3600 level applying downward pressure, the softer US Dollar also contributed. Furthermore, dovish comments from a Bank of England official during the session added to the selling pressure. Nevertheless, overall positive economic data from the UK released during the period limited the pair's losses. Today, resistance is monitored near 1.3600, while support is seen around 1.3450.
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