Forex Today: DXY under pressure amid risk appetite; focus turns to US inflation data

The DXY is under pressure, particularly against its main European rivals, amid risk appetite and following German inflation data. On Friday, the focus will be on US and Eurozone inflation figures. Japan will also release the Tokyo CPI, alongside Industrial Production and Retail Sales. On Asian hours, China's official PMI for manufacturing and service sectors will be released.

Here is what you need to know on Friday, March 31:

Another positive day for Wall Street and a quiet one in the Treasury market. The Dow Jones rose 140 points or 0.43% to post the highest daily close in two weeks, while the Nasdaq reached seven-month highs. Banking jitters continue to fade, and economic data shows no signs of a “hard” or even “soft” landing. A pessimist uncertain outlook is being replaced by just an uncertain outlook.

“The challenge in assessing today’s economy is reconciling the strength of the recent data with the potential for weakness coming from the banking system,” Tom Barkin, Richmond Fed President.

The bond market does not look as optimistic as stocks. US yields drifted sideways on Thursday, not reflecting risk appetite. Bonds will probably take a more decisive direction after Friday’s US Core Personal Consumption Expenditure data.

German inflation figures showed a big decline in the annual rate but not as much as expected. On Friday, Eurozone Consumer Price Index (CPI) is due. So far, March preliminary figures show that inflation is slowing down but is still elevated, just like what European Central Bank (ECB) officials say publicly.

Volatility is set to rise on Friday, considering key inflation numbers due and also the fact that it is the last trading day of the week, month and quarter.

EUR/USD rose past 1.0900 to test the recent top. The pair remains bullish, consolidating important weekly gains, that could face some challenges on Friday with the critical economic reports due. GBP/USD posted the highest daily close in two months, near 1.2400, boosted by risk appetite and the weaker Dollar.

USD/JPY is moving sideways around 132.60. The US Dollar and the Japanese Yen are suffering from the rally in Wall Street. USD/CHF posted the lowest close in weeks and is approaching the key long-term support at 0.9050.

AUD/USD and NZD/USD rose above 0.6700 and 0.6250, respectively. USD/CAD fell for the fourth consecutive day, and it keeps trending lower, last seen trading around 1.3525.

It was a positive day for Emerging market currencies. The biggest gainer was the Rand (ZAR), after the South African central bank surprised with a bigger-thank-expected rate hike. The Bank of Mexico, as expected, raised rates by 25 basis points.

Gold broke above $1,970 and climbed above $1,980, while Silver surged 2.40% to $23.80, the highest level in two months. 
 

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