The US dollar is struggling to gain traction as it faces a challenging economic environment this week, compounded by disappointing data releases. Against the backdrop of Tuesday’s American session, the single currency is flourishing above 1.0800 in the EUR/USD. This new movement is evidence of a spreading revolt against the USD. The changing risk sentiment has created a challenging environment for the US dollar to garner demand. This presents a challenging environment for the Fed to intervene as a stabilizing force for the currency pair.
An ugly consumer sentiment report for March added further downside pressure on the USD. The newest Consumer Confidence numbers out of the states have all missed the mark, deepening the cloud of uncertainty choking the dollar. As a result, investors are increasingly cautious about the dollar's prospects, especially as they await the Core Personal Consumption Expenditures (PCE) data, the Federal Reserve's preferred inflation gauge, due later in the week.
New Home Sales figures haven’t helped matters either in weighing down the USD. Against a backdrop of slightly bearish sentiments for the US dollar, that recent data missed on sales, which wouldn’t have provided the most bullish backdrop for USD. These figures have only compounded the currency’s recent troubles, as their release underscores increased worries about economic growth and U.S. consumer sentiment.
The EUR/USD pair has taken the most advantage from the USD’s struggles, trading back above 1.0800 with relative comfort. The duo’s smashing success lays bare the challenges facing the US dollar. Yet in contrast to its European counterpart, TGV, AVE, ICE, it is a failure. The bullish tone in the currency pair showcases investor speculation shifting towards the common currency amid uncertainties over the US economy.
So all eyes will be on the Core PCE data release later this week. Specifically, they are interested in how these figures might affect the Federal Reserve’s tradeoffs between employment and inflation when implementing monetary policy. The risk here is a faster-than-expected uptick in inflation that forces a pivot in policy expectations, driving an even bigger move against the USD.