The DXY Index is holding above 106 ahead of next week’s US PCE deflator data. On April 26, consensus expects the PCE deflator to stay unchanged at 0.3% MoM in March, mirroring the steady 0.4% MoM readings in CPI readings. Ahead of the Fed’s blackout period next week, Fed officials, including Chair Powell, voiced their discomfort with sticky inflation amid heightened uncertainties over crude oil prices from the tit-for-tat attacks between Israel and Iran. 
At the FOMC meeting on May 1, the Fed will likely project fewer than three cuts at the next meeting in June. Having noted that 9 of the 19 Fed officials wanted two or fewer cuts in the March Summary of Economic Projections, we now forecast 50 bps instead of 100 bps of Fed cuts in the second half of the year. While the Fed sees no hurry to reduce rates, it finds no urgency to lift them either. Inflation is significantly off last year’s highs, with base effects keeping oil prices manageable in YoY terms, assuming no supply shocks in the Middle East. 
Next week, we cannot rule out actions by Japan and South Korea to cushion their currencies against any surprises in the PCE deflator that triggers another round of USD strength. On April 17, the finance ministers from the US, Japan, and South Korea issued a trilateral joint statement to “consult closely” on foreign exchange rate markets. The statement comes a day after the IMF said that foreign exchange intervention could be appropriate in situations where exchange rate volatility was excessive under disorderly market conditions. Overall, there will be much to consider regarding whether the DXY, USD/JPY, and USD/KRW are capped at major resistances around 107, 155, and 1400, respectively.
Quote of the day
"When you reach the end of your rope, tie a knot in it and hang on.”
Franklin D. Roosevelt
19 April in history
US President Franklin D. Roosevelt announced that the US would leave the gold standard in 1933.
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