April Forex Outlook: Banking Crises Cast Shadow Over Global Currency Markets
The foreign exchange markets in April are expected to be impacted by key drivers that include recent banking failures in the US and Europe, creating a level of uncertainty not seen since 2008. These events have hindered any significant uptick for commodity-based currencies and may continue to challenge them in the coming month.
We will now delve into the performance and prospects of key currencies popular with users of BestExchangeRates:
USD United States Dollar:
The US dollar weakened in March despite its haven status and turmoil in the global financial system, such as the collapse of Credit Suisse in Europe and the Silicon Valley Bank collapse in the US. Some voices within the Federal Reserve remain hawkish, even in the wake of these banking collapses, which may continue to put pressure on the USD.
CAD Canadian Dollar:
Despite higher borrowing costs and a sluggish economy, easing inflation and healthy job gains in Canada have led the CAD to perform better than the USD and AUD. The Bank of Canada held its policy rate steady in March, and market participants expect more of the same going forward.
The banking crisis led to an early plunge for the euro, but a subsequent calming in the markets and easing of inflation boosted the shared currency’s value. The European Central Bank (ECB) raised interest rates in March, and the eurozone inflation reading dropped significantly. There is no central bank interest rate decision in April, so it is likely that US data will impact the shared currency’s value.
Inflation and US data remain significant factors for the GBP’s movement, with an unexpected increase in inflation leading the Bank of England (BoE) to increase rates by 0.25%. The next BoE decision will be in May, and inflation will be closely monitored to determine any future moves for the Pound.
AUD Australian Dollar:
The AUD has struggled to climb due to the US and European banking collapses that have created an environment of uncertainty. This outlook remains clouded for the AUD, and its performance will depend on how the residual effects of the banking crisis continue to reverberate across financial markets.
MXN Mexican Peso:
The MXN strengthened against the USD due to rising oil prices after OPEC’s production cut. However, April is generally not a good month for a stronger Peso, and experts at Société Générale are cautious. Despite the Peso’s 8% increase in Q1 experts doubt whether the peso can strengthen towards the levels of USDMXN = 17.45 of 2017.
NZD New Zealand Dollar:
The NZD has similarly struggled for upward momentum as the US and European banking institutions’ strife suppresses demand for risk assets. The outlook for the NZD remains clouded, and its performance will likely be dictated by the ongoing effects of the banking crisis. However, the RBNZ did surprise the markets this week by hiking interest rates by 50 basis points indicating that near term inflation indicators had increased, this gave the kiwi dollar a healthy boost.
JPY Japanese Yen:
The yen has experienced fluctuations in strength, and the market is now focusing on the Bank of Japan’s end-of-April decision for guidance and estimated trade figures. The USD/JPY could trade between 127 and 137 for April.
SGD Singapore Dollar:
The turmoil in the US banking industry proved to be an unexpected boon for the Singapore dollar, despite a cooling domestic economy. The focus is now on the upcoming Monetary Authority of Singapore (MAS) meeting to gauge the future direction of the SGD.
HKD Hong Kong Dollar:
The HKD experienced a short breather in March, but yield pressure has not alleviated due to the Federal Reserve hinting at more tightening work to be done. The outlook for the HKD (fixed to USD) remains uncertain as the market anticipates the future trajectory of the USD yield pressure.
In conclusion, the April foreign exchange outlook is clouded by uncertainty stemming from recent banking failures in the US and Europe. While some currencies, like the Euro and Canadian Dollar, have managed to regain some ground, others, such as the Australian and New Zealand Dollars, continue to struggle. Market participants will be keeping a close eye on central bank decisions, inflation data, and geopolitical developments to gauge the direction of various currency pairs. As the situation remains fluid, investors and traders should remain vigilant and prepared for potential shifts in the global currency landscape.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.