US dollar firms amid cautious market mood
Philip McHugh February 29th 2024 - 2 minute read
The US dollar ticked higher on Wednesday as a bearish mood strengthened the safe-haven currency.
Meanwhile, the pound is stuck in a narrow range so far this morning, with GBP/EUR flat at €1.1681 and GBP/USD muted at $1.2657. GBP/CAD is subdued at CA$1.7187, while GBP/AUD dips to AU$1.9450 and GBP/NZD holds steady at NZ$2.0763.
Coming up, will signs of sticky inflation in the US bolster USD exchange rates today?
What’s been happening?
The US dollar trended broadly higher yesterday as a prevailing risk-off mood bolstered the appeal of the safe-haven currency.
The cautious mood appeared to be linked to events in the Middle East and concerns over the ongoing disruption to shipping in the Red Sea.
However, tempering USD demand was the publication of the latest US GDP figures, as the second estimate of growth in the last quarter of 2023 was revised slightly lower.
The euro, meanwhile, traded sideways on Wednesday following the Eurozone’s latest economic sentiment index as EUR investors were left disappointed by a surprise fall in morale this month.
At the same time, the pound struggled to find support during yesterday’s session as the increasingly risk-sensitive currency was undermined by the bearish market mood.
What’s coming up?
Turning to today, the spotlight is likely to be on the latest US core PCE price index.
The Federal Reserve’s preferred indicator for inflation is expected to report only a modest fall in January, suggesting that inflationary pressures continue to persist.
Will this be enough to temper Fed interest rate cut expectations and lift the US dollar this afternoon?
In the meantime, Germany will publish its consumer price index this afternoon. February’s preliminary CPI figures are expected to report inflation in the Eurozone’s largest economy slowed again this month. Will this stoke European Central Bank (ECB) rate cut bets and drag on the euro?
Finally, in the absence of any notable UK data, the pound may trade without any strong directional bias today.
Written by
Philip McHugh