Dollar Steadies, Focus on U.S. PCE Data and Eurozone Inflation This Week
GBP
GBP/USD is currently down by 0.1%, trading at 1.2668 (interbank). GBP/EUR is trading at 1.1705 (interbank).
U.K. inflation remains above the Bank of England’s 2% medium-term target, suggesting the BOE may lag behind the Federal Reserve and the European Central Bank in terms of rate adjustments.
Mixed Thursday’s Purchasing Managers Index (PMI) data for February provided some support for the Pound, but a drop in U.K. consumer confidence on Friday weighed on it.
The GfK Consumer Confidence index for the UK fell to -21, missing market expectations of -18 and below the previous reading of -19, indicating a contraction in consumer confidence in UK economic activity for February.
Today, markets will focus on commentary from BoE Chief Economist Huw Pill for fresh interest rate guidance. BoE Pill is expected to reiterate the need to maintain interest rates at 5.25% until convinced that inflation will sustainably return to the desired rate.
Data is limited from the UK this week, with housing data scheduled for release along with additional MPC speeches.
Today’s Events (GMT):
11:00 – BoE MPC Member Pill Speaks
EUR
EUR/USD is currently trading at 1.0829 (interbank), showing a softer tone amid a slight rebound in the U.S. dollar during this morning’s session.
Eurozone inflation data on Friday will be closely monitored ahead of the upcoming European Central Bank meeting on March 7. Economists anticipate an annual reading of 2.5% for February, down from 2.8% in January, moving closer to the ECB’s 2% target after reaching double digits in 2022. Inflation reports from Germany, France, and Spain are due on Thursday before the main release.
Investors await confirmation of easing inflationary pressure, but an increase in wage growth could prompt adjustments in current monetary policy restrictions.
While ECB members agree that monetary policy will ease at some point, there is no clear consensus on the timing.
Today’s Events (GMT):
16:00 – ECB President Lagarde Speaks
USD
The Dollar Index, which measures the U.S. dollar against a basket of six major currencies, is marginally lower at 103.832, rebounding from the 103.43 level observed at the end of last week, the lowest since February 2nd.
The U.S. dollar recorded its first weekly loss in 2024 last week but remained within sight of three-month highs, with several Federal Reserve officials cautioning against early interest rate cuts, especially with inflation persisting.
The 2-year and 10-year yields on U.S. Treasury notes are at 4.67% and 4.23%, respectively.
PCE price index data, the Fed’s preferred inflation gauge, is expected to provide more insight into inflation this week, with a forecasted 0.4% increase on a monthly basis.
Several more Fed officials are scheduled to speak this week and are likely to reaffirm the expectation of higher-for-longer interest rates.
Today’s Events (GMT):
13:00 - Building Permits – Forecast: 1.470M
15:00 - New Home Sales (Jan) – Forecast: 680K
CAD
USD/CAD is currently trading at 1.3510 (interbank) in today's session.
Oil prices have declined this morning, extending their downward trend from the previous session as the U.S. dollar strengthened amid concerns that higher-than-expected inflation might delay cuts to high U.S. interest rates, impacting global fuel demand growth.
Last week, Canada's inflation rate, as measured by the CPI, decreased more than anticipated, reaching 2.9%. It is the first time since mid-2021 that inflation has fallen within the BoC target range. The unexpectedly subdued inflation figures suggested the potential for earlier-than-expected interest rate reductions by the central bank.
On Thursday, Canada's Q4 GDP data will be released, with expectations of stable 0.2% growth and an annualized GDP of 0.8%.
Additionally, Wholesale Sales data is set to be published later today.
Today’s Events (GMT):
13:30 – Wholesale Sales – Previous 0.3%
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