Dollar Slips as Moody’s Downgrades U.S. Credit Rating
GBP
GBP/USD is currently trading at 1.3386 (interbank), while GBP/EUR stands at 1.1871 (interbank).
The Pound has strengthened after the UK and the European Union reached a 12-year agreement on fishing rights in UK waters, aiming to reset relations post-Brexit.
Last week, data revealed stronger-than-expected wage growth in March, with average earnings rising 5.5%, above the 5.2% forecast. Inflation is also expected to accelerate, with April’s CPI forecast to hit 3.3%, up from 2.8% in March, reflecting ongoing price pressures.
Chancellor Rachel Reeves recently commented that the UK economy is “starting to turn a corner” after first-quarter GDP expanded by 0.7%, driven by higher consumer spending and increased business investment.
The BoE policymakers remain cautious, with Huw Pill warning that rates may need to stay elevated due to persistent inflation risks.
Despite the BoE’s recent cut to 4.25%, markets have dialled back expectations for further cuts this year, suggesting a more cautious outlook from the central bank.
No significant events are scheduled for today.
EUR
EUR/USD is currently trading at 1.1278 (interbank) after a recent slide, with the pair stabilising following the US credit rating downgrade by Moody’s.
Inflation in the euro area remained steady at 2.2% in April, unchanged from March, while inflation across the broader European Union eased to 2.4%, down from 2.5% the previous month, suggesting price pressures are cooling.
traders expect the ECB to deliver another rate cut at its next meeting, with the Eurozone economy showing signs of slowing amid ongoing global trade uncertainties.
ECB President Christine Lagarde recently highlighted Europe’s relative stability, stating that “Europe is rightly perceived as a stable economic and political area” amid concerns over U.S. trade policy. The ECB’s cautious approach is reflected in recent comments from several policymakers, with markets now pricing in a high probability of further easing this year.
This week, investors will be watching for the latest PMI releases for the Eurozone, Germany, and France, which could provide further clues on the region’s economic health.
Today’s Events (GMT):
10:00 - Core CPI (YoY) (Apr) – Actual: 2.7% vs Forecast: 2.7%
10:00 - CPI (YoY) (Apr) – Actual: 2.2% vs Forecast: 2.2%
USD
The Dollar Index, which measures the U.S. dollar against a basket of six major currencies, has slipped to 100.173 following the recent downgrade of the United States’ sovereign credit rating by Moody’s.
Moody’s lowered the U.S. rating from ‘AAA’ to ‘Aa1’, citing concerns over the growing national debt, which now stands at $36 trillion. The move follows similar downgrades from other major ratings agencies in recent years, reflecting ongoing concerns over fiscal discipline and rising debt levels.
Despite this setback, the dollar has found some support from easing trade tensions, with the U.S. and China reportedly agreeing to a 90-day tariff reduction period.
Under the preliminary deal, Washington will reduce tariffs on Chinese goods from 145% to 30%, while Beijing will cut duties on U.S. imports from 125% to 10%, providing a potential boost to global trade sentiment.
Looking ahead, the focus for U.S. markets this week will be the latest PMI data, which could provide further insights into the strength of the economy.
Today’s Events (GMT+1):
13:30 - FOMC Member Williams, Kashkari and Bostic Speak
CAD
USD/CAD is currently trading at 1.3947 (interbank), with the Loonie facing pressure amid mixed economic signals.
Canadian Prime Minister Mark Carney recently met U.S. Vice President JD Vance to discuss fair trade policies, raising hopes for a potential trade deal that could provide a boost to the Canadian economy.
However, investors remain cautious ahead of the latest Canadian inflation data, due tomorrow, which is expected to show a decline following the removal of the consumer carbon levy in April.
Additionally, Canada’s retail sales figures for March, due on Friday, are forecast to show a modest 0.7% increase.
Oil prices, a critical factor for the Canadian dollar, remain under pressure, with Brent crude trading at $65.20 per barrel and West Texas Intermediate (WTI) at $61.77 per barrel.
No significant events are scheduled for today.
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