Forex Today: DXY recovers despite risk appetite; focus turns to inflation data

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The FX market offers no clear signs ahead of crucial inflation data from the Euro Area and the US. The US Dollar is moving between gains and losses despite risk appetite. The economic calendar for the Asian session is light and could favor more price consolidation. 

Here is what you need to know on Thursday, March 30:

Wall Street indexes closed with strong gains, and the VIX posted the lowest close in three weeks. The S&P 500 reclaimed the 4,000 mark with a 1.40% gain, while the Nasdaq soared 1.79%. Tech and bank sectors rose, as banking concerns continued to ease. Investors turn their focus to incoming inflation data. 

US bonds moved sideways on a quiet session, with yields hovering near recent highs. The Japanese Yen was the worst performer, affected by risk appetite, higher yields and expectations that the Bank of Japan will continue its current policy until the second half of the year. USD/JPY was last seen approaching 133.00, after a 200-pip rally. 

The rally in USD/JPY boosted the US Dollar Index, which rose after two days, ending above 102.50. Regarding US data, Jobless Claims and the third Q4 GDP growth estimate on Thursday will be the preview for Friday’s critical inflation PCE report. 

EUR/USD hit weekly highs and pulled back; it is consolidating around 1.0840.  German inflation will be released on Thursday and Eurozone’s on Friday. European Central Bank (ECB) officials will watch those numbers closely and could have considerable market implications. 

GBP/USD climbed to the highest level in two months above 1.2350 but reversed, falling toward 1.2300. The Euro and the Pound are holding on to significant monthly gains versus the US Dollar. 

The optimism in the stock market did not reflect the usual correlation among commodity currencies. The Loonie continues to outperform, while AUD and NZD weaken. USD/CAD dropped sharply for the third consecutive day, posting the lowest daily close in a month at 1.3560. 

Australian lower-than-expected February CPI data (6.8% YoY vs 7.1%) supported the case for the Reserve Bank of Australia (RBA) to pause at next week’s meeting. AUD/USD slid after the report, bottomed on European hours at 0.6659 and then trimmed losses.  

The Kiwi was the worst among commodity currencies. NZD/USD peaked at 0.6270 and then tumbled toward 0.6200, while AUD/NZD bounced sharply from three-day lows under 1.0700 to weekly highs at 1.0747, despite softer Australian inflation. 

Emerging market currencies cheered the upbeat tone in Wall Street. USD/MXN is looking at 18.00 after falling for the fifth consecutive day, reaching three-week lows. On Thursday, Banxico will announce its monetary policy decision. 

Gold pulled back, finding support around the $1,960 zone, while Silver ended flat at $23.30. All major cryptocurrencies rose on Wednesday. Bitcoin gained more than $1,000, or 4%, to reclaim $28,000. XRP jumped 4.45%.