US dollar slides following FOMC minutes

Philip McHugh February 22nd 2024 - 2 minute read

The US dollar ticked lower on Wednesday, as the minutes from the Federal Reserve’s latest policy meeting proved more dovish than expected.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR flat at €1.1677 and GBP/USD climbing to $1.2674. GBP/CAD is rangebound at CA$1.7049, while GBP/AUD and GBP/NZD retreat to AU$1.9233 and $2.0390, respectively.

Looking ahead, will a strong UK services PMI help to bolster Sterling today?

What’s been happening?

The US dollar held its ground through yesterday’s European trading session as USD investors were reluctant to alter their positions in the currency ahead of the release of the latest Federal Reserve meeting minutes.

USD exchange rates then faltered later in the evening as the Fed minutes proved more cautious than expected.

The pound, meanwhile, was rangebound on Wednesday. While the UK’s latest public borrowing figures reported a sharp expansion in the country’s budget surplus, analysts suggested it was unlikely to be enough to move the dial regarding potential tax cuts from Chancellor Jeremy Hunt in his Spring Budget next month.

At the same time, the euro was steady during yesterday’s session, despite a better-than-expected improvement in Eurozone consumer sentiment this month.

What’s coming up?

Turning to today’s session, the focus will be on the latest PMIs from both the UK and Eurozone.

The UK figures could provide a leg-up to the pound today, if they show that growth in the UK’s services sector continued to expand at a robust pace in February.

In contrast, the Eurozone releases are expected to report growth in the bloc’s manufacturing and services sectors contracted again this month. This could bolster European Central Bank (ECB) interest rate cut speculation and drag on the euro.

While not as influential as the ISM releases, the latest S&P PMIs could also impact the US dollar today. Will a moderation of growth in the US private sector act as a headwind for the ‘greenback’ later this afternoon?

Written by
Philip McHugh

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