# Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-04
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: USD Stumbles as OPEC+ Unexpectedly Cuts Oil Output
Meta Description: Find out how OPEC+ oil output cuts and sluggish U.S. economic data impact the dollar. Stay up-to-date on forex trends and monetary policies.
URL: https://financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fadeshtml

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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The dollar stumbled on Monday, surrendering earlier gains following unexpected oil output cuts from OPEC+, as data showed the U.S. [economy continued to slow](https://www.financedigest.com/thomson-reuters-keeps-outlook-but-wary-of-slowing-economy.html "Thomson Reuters keeps outlook, but wary of slowing economy") with declines in manufacturing and construction spending.

Data on Monday added to the narrative that the Federal Reserve is [near the end](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road") of its rate-hike cycle.

An announcement on Sunday of output target cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, propelled [oil prices](https://www.financedigest.com/oil-prices-dip-on-u-s-crude-reserve-release-inflation-pressure.html "Oil prices dip on U.S. crude reserve release, inflation pressure") higher. Brent crude last traded at $84.9 per barrel, up 5.7%. \[O/R\]

The dollar initially rose after the announcement.

OPEC+ was expected to stick to cuts of two million barrels per day (bpd) which were already in place until the end of 2023, but instead [announced further output cuts of around 1.16 million](https://www.financedigest.com/britain-announces-205-million-pound-auction-for-renewable-power-projects.html "Britain announces 205 million pound auction for renewable power projects") bpd.

The OPEC impact, however, was short-lived, as investors focused on monetary policy and the divergence between the Federal Reserve and other central banks, particularly, the [European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters").

Our working thesis is that we would [probably see](https://www.financedigest.com/the-sepsis-therapeutics-market-to-see-through-the-probable-sea-change-through-digitization.html "The Sepsis Therapeutics Market to see through the probable sea change through digitization") the peak in the U.S. [dollar sometime toward](https://www.financedigest.com/euro-rises-after-spanish-cpi-dollar-slips-towards-8-mth-low.html "Euro rises after Spanish CPI, dollar slips towards 8-mth low") mid-year,” said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto.

That’s predicated on the view that peak [inflation means peak](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked") Fed and that means peak U.S. dollar. But it’s quite possible that we may have seen that earlier than our forecast.”

Monday’s [economic reports](https://www.financedigest.com/worst-flooding-since-1998-leaves-33bn-economic-toll-in-china-according-to-aon-catastrophe-report.html "Worst flooding since 1998 leaves bn economic toll in China, according to Aon catastrophe report") showed U.S. manufacturing [activity in March slumped to its lowest level in nearly three years as new orders continued to contract](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening"). The Institute for Supply Management (ISM) said its [manufacturing PMI fell to 46.3 last month](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI"), the lowest since May 2020, from 47.7 in February.

U.S. construction spending also weakened, down 0.1% in February after increasing 0.4% in January.

The [dollar extended losses after Monday’s data](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week").

On Monday, federal funds futures priced in a 65% chance of another 25 basis-point (bp) [rate hike by the Fed](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") in May. Futures traders have also factored in a pause in June and [rate cuts](https://www.financedigest.com/oil-gains-as-russian-supply-cuts-temper-concerns-over-rate-hikes-high-stocks.html "Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks") by December.

In the euro zone, traders are pricing in around 60 basis points of further tightening by the [ECB](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") by the end of the year after data released on Friday showed an acceleration in core price growth in the euro area.

The euro was last up 0.6% at $1.0905, after touching a one-week low of $1.0788 earlier in the session.

While it’s likely that the Fed is done or close to being done, we are going to see a [little more tightening by the ECB](https://www.financedigest.com/big-fall-in-euro-zone-inflation-offers-little-help-for-ecb.html "Big fall in euro zone inflation offers little help for ECB"). We therefore [see euro/dollar hitting $1.10-$1.12 by the second half of the year,”](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers") Scotiabank’s Osborne said.

The dollar index, which measures the currency against a basket of six [currencies including the euro](https://www.financedigest.com/euro-having-a-laugh-a-quarter-of-brits-take-the-wrong-currency-on-holiday.html "Euro having a laugh: a quarter of Brits take the wrong currency on holiday"), was down 0.9% at 102.01.

Focus this week will be on Friday’s U.S. jobs report, although many [markets will be closed](https://www.financedigest.com/sodium-cyanide-market-to-close-in-on-us-3-bn-valuation-by-2030.html "Sodium Cyanide Market to Close in on US$ 3 Bn Valuation by 2030") for the Easter holiday.

Against the Japanese currency, the [dollar fell 0.3% to 132.44 yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"), after earlier hitting its highest level since around mid-March.

Sterling firmed 0.8% at $1.2422, while the dollar dipped 0.% against the [Swiss franc](https://www.financedigest.com/swiss-franc-grapples-with-safe-haven-identity-crisis-after-credit-suisse.html "Swiss franc grapples with safe-haven identity crisis after Credit Suisse") to 0.912 francs.

The risk-sensitive Australian dollar was last up 1.5% at US$0.6790 ahead of a Reserve [Bank of Australia policy meeting](https://www.financedigest.com/banking-stability-worries-go-behind-closed-doors-at-imf-world-bank-meetings.html "Banking stability worries go behind closed doors at IMF-World Bank meetings") on Tuesday. Markets have priced in an 85% chance the central [bank will hold](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates") rates steady after 10 hikes. The Aussie [dollar earlier hit](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") a one-month high versus the greenback.

In cryptocurrencies, Dogecoin, a meme coin supported by Tesla Inc founder [Elon Musk](https://www.financedigest.com/elon-musk-and-others-urge-ai-pause-citing-risks-to-society.html "Elon Musk and others urge AI pause, citing ‘risks to society’"), soared 27% on Monday to $0.10 after Twitter’s webpage used the token’s dog icon instead of the social media website’s usual blue bird, market participants said.

========================================================

Currency bid prices at 3:58PM (1958 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.0200 102.9400 -0.88% -1.420% +103.0600 +101.9600

Euro/Dollar $1.0906 $1.0842 +0.59% +1.78% +$1.0917 +$1.0788

Dollar/Yen 132.4500 132.8100 -0.27% +1.02% +133.7500 +132.2100

Euro/Yen 144.45 143.97 +0.33% +2.96% +144.9400 +143.6400

Dollar/Swiss 0.9124 0.9152 -0.30% -1.32% +0.9195 +0.9117

Sterling/Dollar $1.2422 $1.2328 +0.77% +2.72% +$1.2423 +$1.2275

Dollar/Canadian 1.3418 1.3516 -0.72% -0.97% +1.3536 +1.3412

Aussie/Dollar $0.6789 $0.6687 +1.53% -0.40% +$0.6790 +$0.6652

Euro/Swiss 0.9950 0.9923 +0.27% +0.56% +0.9962 +0.9905

Euro/Sterling 0.8777 0.8791 -0.16% -0.76% +0.8806 +0.8772

NZ $0.6296 $0.6255 +0.72% -0.78% +$0.6300 +$0.6205

Dollar/Dollar

Dollar/Norway 10.2910 10.4740 -1.63% +4.98% +10.4860 +10.2930

Euro/Norway 11.2187 11.3442 -1.13% +6.91% +11.3189 +11.2127

Dollar/Sweden 10.3640 10.3761 +0.49% -0.42% +10.4416 +10.3556

Euro/Sweden 11.2952 11.2397 +0.49% +1.31% +11.3174 +11.2451

[(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Samuel Indyk in London](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps") and Ankur Banerjee in Singapore; Editing by Toby Chopra, Kirsten Donovan, Josie Kao and Richard Chang)


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