Dollar Retreats Ahead of PMI Data; Euro, Sterling Gain
Risk sentiment boosts confidence
Early Thursday saw the U.S. dollar taking a step back in European trade, as Nvidia’s impressive earnings bolstered risk sentiment. Traders are eagerly awaiting key business activity surveys to gain insights into the global economy’s health. The Dollar Index, tracking the greenback against a basket of six other currencies, traded 0.4% lower at 103.472, marking a nearly 1% decline so far this week.
Strong earnings impact dollar
Nvidia’s strong earnings injected confidence into the global market, leading to a decline in the safe-haven dollar in favor of more cyclical currencies. While the greenback has seen a slight retreat this week, it remains over 2% higher for the year. Traders have scaled back expectations for multiple rate cuts by the Federal Reserve this year, following the bank’s late-January meeting and statements from Fed officials reinforcing their cautious stance.
Focus on upcoming data
Traders are now turning their attention to the release of weekly jobless claims and, more significantly, the ISM Manufacturing and Services PMI data for February, which are pivotal in gauging the economy’s underlying strength. Analysts at ING anticipate the dollar to remain strong in the coming weeks, supported by a robust January core PCE release, before potentially softening in March.
Eurozone and UK updates
The euro rose 0.5% to 1.0869, benefiting from a positive investment environment. PMI data from Europe indicated ongoing challenges for the German economy, countered by encouraging figures from France and the eurozone as a whole. Meanwhile, the pound traded 0.5% higher at 1.2701, with strong expansion expected in the UK’s dominant services sector. Additionally, the Turkish lira has delivered impressive gains against the dollar this year, leading the pack in EM currency performance.
Yen remains weak
The yen traded largely unchanged at 150.25, staying above the significant 150 level following weaker-than-expected PMI data. In Asia, the yuan edged higher to 7.1902 but remained uncertain due to doubts over the country’s economic rebound. Despite government intervention in currency markets, bigger losses in the yuan were effectively held back.
