US dollar buoyed by risk-off flows and upbeat data

Philip McHugh February 9th 2024 - 2 minute read

The US dollar strengthened on Thursday as it was supported by a cautious mood and better-than-expected US labour figures.

Meanwhile, the pound is trading sideways so far this morning, with GBP/EUR flat at €1.1714 and GBP/USD stable at $1.2629. GBP/CAD is rangebound at CA$1.6994, while GBP/AUD holds steady at AU$1.9408 and GBP/NZD slips to NZ$2.0589.

Coming up, will confirmation of a sharp slowdown in German inflation place the euro on the defensive today?

What’s been happening?

The US dollar firmed through yesterday’s session, with the currency’s initial gains coming as market sentiment soured in the wake of worrying data from China, which showed the world’s second-largest economy slipped further into deflation.

The upside in USD exchange rates was then reinforced by the publication of last week’s initial jobless claims.

The figures reported a larger-than-expected fall in new unemployment claims. This eased US labour market concerns and bolstered expectations the Federal Reserve will leave interest rates on hold for longer.

Meanwhile, the risk-off mood soured investors on the pound on Thursday. Although some hawkish comments from Bank of England (BoE) policymaker Catherine Mann helped to temper these losses.

Mann said she wasn’t convinced that inflationary pressures will continue to dissipate in the coming months and pointed to the turmoil in the Middle East as a key risk for the UK’s inflation outlook.

At the same time, the euro traded sideways yesterday amid a lull in notable Eurozone data.

What’s coming up?

Kicking off today’s session was the publication of Germany’s latest inflation data.

January’s finalised figures confirmed German inflation slowed to its lowest rate since June 2021, leaving the euro muted this morning.

Meanwhile, in the absence of any notable UK economic data, movement in the pound may be tied to market risk appetite. Expect to see GBP exchange rates slip if a risk-off mood prevails.

Closing out this week’s session will be a speech by Federal Reserve policymaker Lorie Logan later this evening. Her comments could provide a boost for the US dollar if she strikes a hawkish tone.

Written by
Philip McHugh

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