The US Dollar (USD) has been strengthening in the past few days after Treasury yields soared.[0] Supported by upbeat macroeconomic data releases and hawkish comments from Fed officials, the USD Index (USD) reached its highest level since early January above 104.00 on Friday.[0]
In the Eurozone, the European Union Commission raised its 2023 GDP forecast to 0.9% from a prior estimate of 0.3% and cut its 2023 inflation forecast to 5.6% from a previous forecast of 6.1%.[1] This led the Euro to stay at the same level as against a marginally weaker US dollar with EUR/USD changing hands around 1.0760.[2]
In the US, retail sales rebounded sharply in January after two straight monthly declines, rising 3.0% on the month compared with December’s 1.1% fall, data showed Wednesday.[3] The greenback surged on the back of the data release and clung to most of those gains on Thursday, with the US Dollar Index (USD) outperforming its rivals.[4]
Meanwhile, for the central bank to slow tightening pace from current 50bps per meeting, ECB Governing Council member Centeno said, “we really need to see inflation converging to 2% in the medium term”.[1]
The market will pay close attention to central bank speak ahead of the weekend.[0] In the absence of high-impact data releases, EUR/USD should be moved almost solely by the US inflation report today.[5] The preliminary (i.e. second) release of eurozone growth numbers looks unlikely to impact markets and there is only one scheduled European Central Bank speaker (Gabriel Makhlouf).[5]
Data is expected to continue to be the main factor affecting the dollar and the world’s risk climate, as the intensity of the US economic downturn is still a vital determinant of interest rate expectations, particularly concerning the timing, magnitude, and speed of the Federal Reserve’s easing over the next few years.[3]
From a technical standpoint, the Euro may remain vulnerable to the US dollar.[6] EUR/USD moved downward last week, breaking through a Bearish Rising Wedge chart formation.[6] Investing in foreign currency or other off-exchange products using leverage can be quite risky and may not be suitable for all types of investors.[2] It is recommended that you assess if trading is suitable for you based on your individual situation before making any decisions.[2] Engaging in Forex trading carries a[2] Deposits can be exceeded by losses.[2]
0. “Forex Today: Hawkish Fed bets fuel US Dollar rally ahead of the weekend” FXStreet, 17 Feb. 2023, https://www.fxstreet.com/news/forex-today-hawkish-fed-bets-fuel-us-dollar-rally-ahead-of-the-weekend-202302170703
1. “Dollar Fades On Lower T-Note Yields And Stronger Stocks” Barchart, 13 Feb. 2023, https://www.barchart.com/story/news/14160129/dollar-fades-on-lower-t-note-yields-and-stronger-stocks
2. “Euro Update: EUR/USD Holds Early Gains After EU GDP Release, US CPI Looms” DailyFX, 14 Feb. 2023, https://www.dailyfx.com/news/euro-update-eur-usd-holds-early-gains-after-eu-gdp-release-us-cpi-looms-20230214.html
3. “Dollar retreats from six-week high; data deluge eyed By Investing.com” Investing.com, 16 Feb. 2023, https://www.investing.com/news/forex-news/dollar-retreats-from-sixweek-high-data-deluge-eyed-3005009
4. “U.S. dollar advances after producer prices, jobless claims data” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/16/dollar-climbs-on-higher-rate-expectations-aussie-slides-on-jobs-shock.html
5. “FX Daily: Asymmetrical upside risks for the dollar today” ING Think, 14 Feb. 2023, https://think.ing.com/articles/fx-daily-asymmetrical-upside-risks-for-the-dollar-today/
6. “US dollar price action setups: EUR, AUD, JPY, GBP” https ://www.ig.com, 14 Feb. 2023, https://www.ig.com/en-ch/news-and-trade-ideas/us-dollar-price-action-setups–eur–aud–jpy–gbp-230214