USD demand kicked in yesterday as treasury yields climbed ahead of the core PCE inflation numbers on Friday. Earlier in the day the EUR got hit as regional German inflation numbers came in lower than a month ago, seeing GBPEUR briefly hit the highest since August 2022.
**Daily move - against G10 rates at 7:30am, 30.05.24
** Indicative rates - interbank rates at 7:30am, 30.05.24
Second Q1 estimates for US GDP, expected to be downgraded to 1.3%, growth from 1.6%, and core PCE, expected to remain at 3.7%, will be released this afternoon. Price action over the last 3 days on USD has been interesting, with both GBPUSD and EURUSD retracing off recent highs quite aggressively. Either this is the markets booking profits on the recent gains on the pairs, or markets could be expecting an upside surprise in tomorrow’s core PCE numbers.
We suggested yesterday that perhaps GBP was overbought, relatively speaking, and today we note recent price action suggests that perhaps USD could be due for a rebound. There has been a noticeable support line on the USD index throughout this year, where the currency has rebounded 4 times off this line before going onto make gains. Could tomorrow's core PCE numbers extend this trend?
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