US dollar strengthens in downbeat trade

The US dollar ticked higher on Tuesday as a cautious mood saw investors favour the safe-haven currency.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR muted at €1.1879, and GBP/USD dipping to $1.2883. GBP/CAD is rangebound at CA$1.7772, while GBP/AUD and GBP/NZD tick up to AU$1.9538 and NZ$2.1730, respectively.

Looking ahead, will an uptick in the latest PMIs from the UK and Eurozone provide a boost for their respective currencies today?

What’s been happening?

The US dollar firmed during yesterday’s session as a souring market mood bolstered the appeal of the currency.

These risk-off flows appeared to stem from a sense of caution ahead of some high-impact economic data later in the week.

Capping the upside in the dollar, however, were ongoing Federal Reserve interest rate expectations. A September rate cut is now almost entirely priced in, with some USD investors beginning to speculate on the potential for a second cut before the end of 2024.

Meanwhile, the euro was pressured on Tuesday following comments from European Central Bank (ECB) Vice President Luis de Guindos, in which hinted at a potential September interest rate cut.

However, the single currency was able to claw back some of these losses later in the session after a stronger-than-expected improvement in Eurozone consumer confidence.

At the same time, the pound traded without strong directional bias yesterday, amid a lull in UK economic data.

What’s coming up?

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

The Eurozone figures are scheduled for release first and are forecast to report a modest improvement in private sector activity this month, potentially offering some support to the euro this morning.

Meanwhile an expected acceleration in UK services sector growth in July may help underpin the pound through today’s session.

Today will also see the publication of the latest US S&P Global PMIs. While not as influential as the ISM releases, if they report a slowing of US private sector growth the US dollar may falter. Although any downside in the ‘greenback’ may prove limited ahead of tomorrow’s US GDP data.