The US Dollar remains strong in most pairs despite the fall in safe-haven flows. This is due to the fact that markets expect data out of the United States this week to show continued economic growth.
“The US preliminary April PMIs (Tuesday), Q1 GDP (Thursday) and March Personal Income and Outlays report (Friday) are expected to back American economic exceptionalism,” says Brown Brothers Herriman in a note on Monday, adding, “Overall, as long as US economic activity remains solid, the cyclical USD uptrend is intact.”
The most important release will be Friday’s US Personal Consumption Expenditure (PCE) data for March, including the Federal Reserve’s (Fed) preferred gauge of inflation, the Personal Consumption Expenditure – Price Index.
If PCE inflation in the United States (US) registers a higher-than-expected rise it will boost USD/JPY, by suggesting an even longer delay before the Fed reduces interest rates. If interest rates remain higher for longer it increases demand for USD from foreign investors looking to park their capital
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