USD

While markets may be watching for risks approaching the banking sector in the rearview mirror, this week also continues with fresh attempts to look forward. Risk assets have tentatively been pushing higher, even if Money Market Funds continue to attract large volumes of nervous deposits. In particular, yields among key US Treasuries have risen sharply since the end of last week. The push higher in risk appetite has been assisted by positive comments by key central bankers, such as Andrew Bailey from the BoE (see GBP). On the data front, the latest US Consumer Confidence (March) is set for release later today. The dollar has been trending lower, with the dollar index (DXY) declining by roughly 0.5% since the beginning of the week. 

EUR

Despite yesterday’s German IFO report reflecting ongoing strength across all components, the data was likely arranged before the banking jitters accelerated. We will look toward next month’s data to give us more of an indication as to whether sentiment has been seriously impacted or not. The same can be said of the Italian Business Confidence report, which mirrored that of the German IFO. Having risen through yesterday, EUR/USD is clinging to its recent gains, rising by a further 0.25% this morning. GBP/EUR is also marginally lower overall. 

GBP

According to the latest data, the recent jump in UK inflation appears to be aided by an ongoing increase in food price inflation. Supermarket prices increased by an annual rate of 17.5% during March, reflecting the highest monthly jump since regular data tracking on the subject started in 2008. In other news, BoE governor Andrew Bailey suggested that markets have been "testing Banks" after the recent SVB/Credit Suisse turmoil and that "we are not in the same position at all as in 2008." He also reiterated that these incidents would not sway the BoE from its goal of tackling inflation. The pound has responded well to Bailey's upbeat outlook, with GBP/USD rising by roughly 0.5% this week. 

JPY

Overall, the Yen continues to consolidate, having previously received large volumes of safe-haven inflows over the past few weeks. However, that consolidation looks slightly under pressure this morning, with USD/JPY declining by around 0.5% and EUR/JPY down by about 0.3%. Looking forward, we would expect the major Yen crosses to reflect broader risk appetite until the latest key Japanese inflation data later in the week. 

CAD

With commodity prices staging something of a recovery over the past week, including Oil, the Loonie has also regained upside momentum against the greenback. USD/CAD is testing three-week lows, with the move also possibly aided by stronger-than-expected Canadian Retail Sales. 

MXN

The Peso continues to claw back recent losses against the dollar as we approach this Thursday’s key Banxico interest rate decision. On that note, the central bank is still considering whether to reduce the size of the next rate hike, having raised rates by 0.5% last month, with some analysts openly calling for a 25bps move this time round. In the meantime, USD/MXN has declined by 3% over the past week and a half.

BRL

USD/BRL is trading near lows not witnessed for around two weeks, having declined by about 1.3% from the recent dollar high. The move has been consistent with gains for emerging market currencies since the tentative risk recovery. The path forward for USD/BRL will likely be dominated by broader market sentiment.