The markets are sending mixed signals in the midst of an uncertain economic outlook. Even central bankers seem uncertain about what to do next. However, recent economic data from the US indicates that the economy is slowing down and inflation is decreasing. Interestingly, there were no banking failures this week.
On Friday, the US Dollar rebounded strongly, erasing some of its weekly losses. However, despite this positive development, the overall trend for the dollar remains bearish. Experts predict that the Federal Reserve (Fed) will likely raise interest rates one last time in May, before initiating a long pause, followed by rate cuts. The bond market also seems to suggest that a recession is on the horizon, with lower interest rates expected by the end of the year.
Meanwhile, the EUR/USD exchange rate rose for the week, reaching a year-high above 1.1000. Although the trend is still bullish, some signs of exhaustion are starting to emerge. Next week's Eurozone PMI data could prove critical for the European Central Bank's (ECB) future monetary policy decisions. While the market currently anticipates that the ECB will raise interest rates further, weak PMI numbers could lead to a revision of this outlook for the second half of the year.