Risk Sentiment Boosts Euro and Pound, Dollar Falls Ahead of Key Data
Risk sentiment hits dollar
The U.S. dollar saw a retreat in early European trade on Thursday, with risk sentiment getting a boost from Nvidia’s impressive earnings. Traders are eagerly awaiting the release of key business activity surveys to gauge the health of the global economy.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower to 103.472, marking a nearly 1% decline so far this week.
Eurozone services PMI impress
In Europe, the euro rose 0.5% to 1.0869, benefiting from a more positive investment environment. The latest PMI data indicated that the German economy is still struggling, while French numbers show some improvement. The eurozone as a whole saw an increase in services PMI to 50.0, while the manufacturing PMI exceeded expectations at 48.9.
Yen still weak after PMI data
The yen was largely unchanged at 150.25, remaining above the key 150 level after disappointing PMI data weighed on it. Meanwhile, the yuan edged higher to 7.1902 in Asia, showing skepticism about an economic rebound in the country.
Strong earnings from Nvidia have lifted global confidence, leading to a decline in the safe-haven dollar in favor of more cyclical currencies.
While the greenback has come off its highs this week, it remains over 2% higher for the year as traders have scaled back their bets on multiple rate cuts by the Federal Reserve.
The Fed’s late-January meeting minutes, released on Wednesday, indicated that the bank is in no rush to lower interest rates in the near-term. Several Fed officials have also emphasized this stance, citing concerns about persistent inflation.
Analysts at ING believe that the dollar will remain strong for the next couple of weeks and then decline in March following a softer payrolls report and a weaker February CPI figure.
Eurozone and U.K. PMI data are expected to show strong expansion, while Turkish lira leads the pack in delivering gains against the dollar this year.
Markets are still on watch for any intervention in currency markets by the Japanese government, following verbal warnings from ministers last week. Signs of government intervention in currency markets have held back bigger losses in the yuan this week.
