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US dollar rebounds on strong US data

Philip McHugh October 25th 2023 - 2 minute read

The US dollar rallied on Tuesday, as USD demand was underpinned by upbeat US data and a cautious market mood.

Meanwhile, the pound is stuck in a narrow range at the start of today’s session, with GBP/EUR flat at €1.1486 and GBP/USD stable at $1.2160. GBP/CAD is rangebound at CA$1.6732, while GBP/AUD and GBP/NZD hold steady at AU$1.9102 and NZ$2.0805, respectively.

Looking ahead, will a modest improvement in German business morale be enough to lift the euro this morning?

What’s been happening?

The US dollar mounted a convincing recovery during yesterday’s European session, with the currency clawing back the bulk of Monday’s losses.

The ‘greenback’s recovery was initially driven by a souring market mood, before being reinforced by the publication of stronger-than-expected US PMI figures.

In contrast, the euro was pressured by the publication of the Eurozone’s own PMIs on Tuesday as these reported the contraction in the bloc’s private sector continued to deepen this month.

The pound, meanwhile, was initially undermined by the UK’s latest unemployment figures amid further signs of a slowing UK labour market.

Sterling then faced further pressure as the UK’s PMIs also reported a contraction in private sector activity.

What’s coming up?

This morning will likely see the publication of Germany’s latest IFO business climate indicator in the spotlight.

The index has previously reported that business morale in the Eurozone’s largest economy had deteriorated for five consecutive months. But economists forecast the index will report a modest improvement in sentiment this month.

However, it remains to be seen if this will be enough to lift the euro, particularly ahead of the European Central Bank’s (ECB) looming interest rate decision.

USD investors will look to a speech by Federal Reserve Chair Jerome Powell for fresh impetus today, with the US dollar potentially facing some resistance if Powell strikes a dovish tone.

Meanwhile, the pound may struggle to find direction today, amid a lull in UK economic data.

Written by
Philip McHugh

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