Dollar Wobbles as ECB Hints at Rate Cuts, US Data Disappoints

London: 4 April 2024 (TraderMade): The US dollar is facing headwinds on two fronts today. First, the European Central Bank (ECB) released minutes from its March meeting, hinting at a potential rate cut in June. Second, economic data in the US has cast some doubt on the strength of the economy, raising expectations of a Federal Reserve rate cut later this year.

ECB Signals Shift on Interest Rates

The ECB minutes revealed growing confidence that inflation is on track to reach its target of 2%. This perspective has fueled speculation that the bank may cut interest rates in June, a move that would weaken the Euro and potentially strengthen the dollar. However, the ECB also acknowledged some ongoing concerns, such as wage growth, which could still derail their plans.

US Data Weakens Dollar's Appeal

Recent US economic data have added to the dollar's woes. Slower growth in the service sector and higher-than-expected jobless claims suggest the US economy may be losing some momentum. This trend has bolstered expectations that the Federal Reserve will cut interest rates later this year, making the dollar less attractive to investors seeking higher returns.

Looking Ahead

The dollar's future path remains uncertain. The ECB's decision on interest rates and upcoming US labor data will be key factors to watch. If the ECB cuts rates and the US economy continues to weaken, the dollar could face further pressure.

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