US dollar falters as US GDP revised lower

The US dollar wavered on Thursday, fluctuating in the afternoon after a weaker-than-expected US GDP print.

Meanwhile the pound is trading in a narrow range so far this morning, with GBP/EUR stable at €1.1346 and GBP/USD flat at $1.2018. GBP/CAD is rangebound at CA$1.6292, while GBP/AUD and GBP/NZD are buoyed at AU$1.7688 and NZ$1.9322, respectively.

Coming up, will the latest core PCE price index help to reinforce Federal Reserve interest rate expectations and boost the US dollar?

What’s been happening?

The US dollar initially firmed yesterday. The currency continued to catch bids as a result of the hawkish minutes from the Federal Reserve’s latest policy meeting.

However, the ‘greenback’ then fluctuated through the second half of the session after the latest US GDP figures disappointed.

The latest estimate for growth revised fourth quarter growth down from 2.9% to 2.7%, tempering Fed rate hike bets.

The euro, meanwhile, held in a narrow range on Thursday as the Eurozone’s finalised CPI figures for January confirmed inflation in the bloc slowed to a seven-month low.

At the same time, the pound shook off its initial softness thanks to some hawkish comments from Bank of England (BoE) policymaker Catherine Mann.

Speaking to the Resolution Foundation, Mann said she believed more tightening is needed and cautioned that a pivot from the BoE is not imminent.

What’s coming up?

Today’s data calendar is headlined by the publication of the latest US core PCE price index.

As the Federal Reserve’s preferred indicator for inflation this could inject significant volatility into USD exchange rates later this afternoon.

Could a robust inflation reading in January reinforce Fed rate hike bets and propel the US dollar higher?

The euro could struggle to find support today amid a sombre mood in Europe as we mark the first anniversary of the war in Ukraine.

Meanwhile, a speech by BoE policymaker Silvana Tenreyro, will be in the spotlight for GBP investors. As one of the BoE’s more dovish members, Tenreyro’s comments have the potential to drag on the pound this afternoon if her remarks are at odds with Mann.