U.S. Dollar Retreats Ahead of FOMC Minutes This Week
GBP
GBP/USD has increased and is currently trading at 1.2620 (interbank). Similarly, GBP/EUR is trading at 1.1708 (interbank).
The Pound's rise can be attributed to a slight weakening of the dollar and positive data released on Friday showing a significant increase in U.K. retail sales, marking the fastest growth in nearly three years for January.
Annual retail sales unexpectedly rose by 0.7%, defying expectations of a 1.4% decline. In December, there was a sharp contraction of 2.4% in economic data.
Notably, food retail sales saw a notable growth of 3.4% in January, contributing to the overall positive retail sales data.
Market analysts are increasingly speculating that the BoE may keep interest rates unchanged for a longer period. This sentiment is supported by ongoing price pressures in the UK economy, driven by persistent service inflation, stable labour demand, and strong household spending.
While there is limited UK data this week, investors are awaiting the release of the latest PMI data scheduled for Thursday.
No significant events are scheduled for today
EUR
EUR/USD has made gains, currently trading at 1.0780 (interbank).
Last week, ECB President Christine Lagarde emphasized that the disinflation process would need to continue before the central bank could confidently consider it sustainable.
Investors are eagerly awaiting Tuesday's ECB survey of negotiated wage rates and Thursday's release of flash PMI data for February.
The ECB's wage data holds significance as policymakers have repeatedly cautioned against excessive wage growth, although it is widely recognised as a lagging indicator.
Additionally, inflation data will be released, with expectations for the annual Core Consumer Price Index (CPI) to decrease to 3.3%, while CPI for January is anticipated to correct from 2.9% to 2.8%.
Towards the end of the week, market attention will turn to Germany's GDP data and various interventions and meetings of ECB policymakers.
No significant events are scheduled for today
USD
The dollar index, which measures the currency against a basket of other major currencies, has dipped by 0.1% to 104.067, remaining close to three-month highs.
Last week marked the fifth consecutive positive week for the greenback, following data showing higher-than-expected increases in both U.S. producer prices and consumer prices for January. This has raised speculation about the Federal Reserve delaying the start of its anticipated rate-cutting cycle from March to the beginning of summer.
Activity in foreign exchange markets has been limited on Monday due to the Presidents’ Day holiday in the U.S., with traders taking the opportunity to secure recent dollar gains.
The focus for the week will be on Wednesday's release of the minutes from the Fed meeting held last month, along with speeches by several Fed officials including Christopher Waller and Raphael Bostic.
No significant events are scheduled for today
CAD
USD/CAD is currently trading at 1.3478 (interbank) in today’s trading session.
Both U.S. and Canadian markets are closed today due to the President's Day holiday and Family Day, respectively.
Last March, BoC deputy governor Toni Gravelle indicated that policymakers anticipated concluding quantitative tightening by late 2024 or early 2025.
However, speculation among short-term traders suggests an imminent acceleration of this trend.
The key economic event from Canada this week will be the release of Canada’s latest inflation figures (CPI) for January, with expectations for CPI to ease to 3.2% annually from 3.4% in December.
Later in today’s session, the latest Canada Raw Materials Price Index (RMPI) will be published.
Today’s Events (GMT):
13:30 - RMPI (Jan) – Forecast: 0.7%
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