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US dollar rallies on surprisingly strong data

Philip McHugh June 30th 2023 - 2 minute read

The US dollar trended broadly higher on Thursday as USD investors welcomed some surprisingly strong US data.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR stable at €1.1617 and GBP/USD flat at $1.2613. GBP/CAD is steady at CA$1.6723, while GBP/AUD and GBP/NZD dip to AU$1.9039 and NZ$2.0719, respectively.

Looking ahead, will some mixed Eurozone inflation figures inject some volatility into the euro today?

What’s been happening?

The US dollar was initially subdued yesterday. The currency giving ground to both the pound and euro, despite more hawkish comments from Federal Reserve Chair Jerome Powell.

USD exchange rates then rebounded sharply in the afternoon on the back of the latest US data releases.

An upwards revision to US GDP, alongside a welcome drop in new jobless claims, helped to bolster Fed interest rate expectations and propelled the ‘greenback’ higher.

A deterioration in Eurozone economic sentiment, coupled with its negative correlation with the US dollar saw the euro falter on Thursday.

The drop in EUR came despite Germany reporting domestic inflation was hotter than forecast this month.

Meanwhile, the pound was subdued through yesterday’s session amid ongoing concerns over the UK’s economic outlook.

What’s coming up?

Centre stage today will be the publication of the Eurozone’s latest consumer price index.

June’s preliminary figures are forecast to show that while headline inflation continued to cool, core inflation began to tick up again.

Depending on whether this boosts or undermines European Central Bank (ECB) rate hike bets, will determine the direction of the euro today.

In the meantime, confirmation the UK avoided a winter recession may offer modest support to the pound this morning.

Closing out the week will be the publication of the Fed’s preferred indicator for inflation, the US core PCE price index.

Today’s release is expected to report core inflation held steady at 4.7% in May. Additional signs that underlying inflation remains sticky may bolster Fed rate hike bets and lift the US dollar.

Written by
Philip McHugh

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