EURUSD is Aiming for the 1.07 Level in Q2 as the Fed won't Cut Rates

As the new week began, a light holiday atmosphere prevailed, but market activity picked up, especially with attention focused on the US manufacturing sector. Despite the holiday mood, all eyes were on the latest ISM report, which showed surprising strength. Key measures like new orders, production, and employment all showed improvement, boosting investor confidence, and pushing US yields higher across the board by 9-12 basis points.

USA Data 

Looking at the Forex market, the US dollar stood out, showing notable strength against European currencies in the G10 group. Among emerging markets, the Brazilian real took a hit from the dollar's resurgence, worsened by the BRLMXN exchange rate crossing 3.30. Though Asia remained relatively calm, the Thai baht bore the brunt of the dollar's rise, hitting new highs for the year.

After disappointing HICP figures from Italy and France, anticipation built for Eurozone data releases. Goldman Sachs economists predicted a decline to 2.3% year-on-year in March, setting the stage for potential market shifts. The difference in interest rate outlooks between the Eurozone and the US Federal Reserve cast uncertainty over the Euro's near-term performance, leaving it vulnerable until the Fed's plans became clearer.

Euro Data Releases Today 

The upcoming ECB policy rate cuts in June added further complexity to the Euro's path. Though modest downside is expected until the Fed's stance becomes clearer, unexpected inflationary surprises could disrupt this delicate balance. Despite positive signs in Euro-area activity and economic indicators, the Euro has struggled against the resolute US dollar, hovering near yearly lows.

EURUSD 1H Chart 

Looking at emerging markets, Turkey's local elections stirred anticipation. Despite initial concerns, the acknowledgment of election results by the AKP and Erdogan's vow to maintain economic stability provided some relief. Standard Chartered economists foresee a resurgence in capital inflows, supported by the government's commitment to stabilizing inflation through consistent economic policies. This, combined with improvements in the current account, offers hope for the Turkish lira compared to recent months.

Every development is now shaping the landscape of opportunity and risk. As we go through uncertainties, the weeks ahead promise to be filled with twists and turns, where each piece of data and policy decision plays a pivotal role.

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