The US dollar is currently facing pressure as expectations grow for a potential rate cut by the Federal Reserve, spurred by disappointing jobs data. The recent revision of employment figures by the Bureau of Labor Statistics (BLS) has added to concerns about the greenback’s strength. The BLS reported a historic downward revision of -911,000 jobs for March 2025, which was larger than anticipated and marked a record adjustment. This news has contributed to a notable decline in the dollar’s value in the currency markets.
Market participants are now turning their eyes toward upcoming inflation data, with both the Producer Price Index (PPI) and Consumer Price Index (CPI) set to play a pivotal role in shaping interest rate expectations. The PPI data is expected to show a 0.3% month-over-month increase, which would follow a stronger-than-forecast 0.9% rise in the previous month. Similarly, the CPI is anticipated to print a 0.3% month-over-month figure, potentially raising the year-over-year rate to 2.9%, up from 2.7%.
As traders brace for these inflation figures, sentiment remains broadly positive in the markets, with the dollar under continued pressure as rate-cut expectations mount. This has kept equity indices and other risk assets buoyant, as the prospects of more dovish Fed signals intensify in the lead-up to the central bank’s next meeting.
In foreign exchange markets, the GBP/USD and EUR/USD pairs are maintaining their bullish trajectories amidst the dollar’s weakening. The GBP/USD pair is currently benefiting from a combination of better-than-expected UK economic data and the dollar’s decline. Technical indicators suggest that if it manages to break through significant resistance levels between 1.3540 and 1.3588, the pair may reach July highs near 1.3788. Support for GBP/USD is identified around the 1.3500 mark and further at the 1.3435/60 range.
Meanwhile, the EUR/USD exchange rate remains in a bullish trend as it navigates a holding pattern before the US CPI release. The pair successfully broke above a short-term bearish trend line, which could signal a potential move toward the July peak of 1.1830. Support for the pair is currently around the 1.1700 area, an important zone that previously served as resistance, with additional support between 1.1560 and 1.1620.
Looking ahead, the trajectory of the US dollar will heavily depend on the forthcoming economic data. If the reports support further rate cuts, the dollar’s weakness is likely to persist, benefiting currencies like GBP/USD and EUR/USD. On the contrary, if inflation data comes in unexpectedly hot, it might lead to temporary gains for the dollar, though concerns about labor market weakness could undermine any rally.
In this fluctuating environment, many traders are advised to focus on buying opportunities in pairs such as EUR/USD and GBP/USD rather than pursuing short positions, given the prevailing market conditions.
For those seeking to navigate this complex landscape, InvestingPro offers a range of tools that provide insights into actionable trade ideas, including AI-managed market strategies, extensive historical financial data, and insights into high-profile investors’ positions. These can help investors make well-informed decisions amid ongoing market volatility.
