Markets Pause After Dollar Drop as Investors Await Fresh Cues from Central Banks
📊 Markets are steady this morning, with limited data on the calendar. The spotlight now shifts to Fed commentary, especially from Governor Waller, which could shape near-term direction for the dollar.
Key Market Takeaways:
- Dollar momentum fades: The initial optimism around U.S.–China tariff relief has begun to lose steam, prompting a shift in market sentiment.
- Investor focus shifts: With trade-related enthusiasm cooling, attention is turning back to fundamentals and upcoming economic data.
- Greenback under pressure: As the boost from tariff news fades, the dollar faces renewed selling pressure from traders reassessing rate expectations.
Market Recap:
1. Dollar Retreats on Softer U.S. CPI
U.S. inflation data came in below expectations yesterday, prompting a broad pullback in the dollar. This reversed some of Monday’s strength and reinforced investor expectations for rate cuts ahead.
Market view: Despite dovish market pricing (two rate cuts still expected), major institutions like Goldman Sachs and Barclays forecast only one cut this year, highlighting a growing disconnect between markets and central bank guidance.
2. Pound Steadies After Jobs Data
UK employment figures released earlier in the day pointed to cooling wage growth — a signal that inflationary pressures may be easing.
GBP reaction: The pound traded mixed through the session, as markets balanced softer wage growth with steady unemployment figures.
BoE outlook: Slower wage momentum could give the Bank of England more room to cut rates, aligning with expectations for two cuts later this year.
Today’s Market Update:
🔹 Markets Stabilise After Dollar Dip
After Tuesday's sharp U.S. dollar sell-off—driven by softer-than-expected CPI data—a more measured tone has returned to global markets this morning.
What it means: Investors are now reassessing the inflation outlook and potential Fed rate cuts, with the dollar showing signs of continued vulnerability unless new catalysts emerge.
🔹 Eurozone Focus: German CPI (Final Reading)
Today’s economic calendar is relatively light, with only the final German inflation figures due.
Market impact: As these are revisions rather than fresh data, they’re not expected to spark significant euro volatility.
🔹 Central Bank Watch
Fed Speakers Lined Up Attention turns to central bank commentary, particularly from Federal Reserve Governor Christopher Waller later today.
What to watch: Any dovish signals could reinforce dollar softness, while unexpected tariff headlines or hawkish surprises may reverse that trend.
14th May 2025
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