Home Daily Commentaries FX market volatility could increase after US inflation data due today

FX market volatility could increase after US inflation data due today

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Thursday 29 February, 2024

Daily Currency Update

The Euro has shown signs of fatigue as resistance above 1.0850 vs the Dollar has stalled its advance. This may partly be because interest rate futures markets are pricing in 100 basis points of cuts this year. Markets were expecting 150 basis points of cuts by the US Federal Reserve but that has been trimmed to just 75 points over recent months. As such the Commodities Futures Trading Commission ( CFTC ) is reporting that short positioning has increased for the Euro in the last 8 weeks. This could cause the Euro to come under pressure.

Markets are slightly optimistic for the UK economy. The Purchasing Managers Index ( PMI ) is a leading economic indicator and positive data suggests a more favorable backdrop for the Pound. Business confidence has also been stronger in Britain than in Europe suggesting the Pound may continue its rally vs the Euro.

In the US the Dollar has staged a slight rebound on foot of higher Treasury yields and uncertainty around the PCE inflation data due for release today. The Federal Reserve has made it clear that the likely direction of interest rate policy is data-dependent and so reinforces the importance of today's economic data.

Key Movers

The Euro has been attempting to stage a recovery this week vs the Dollar and Pound. Volatility has been muted as markets await today's inflation data out of the US which will dive direction for the Euro from present levels of 1.0840

The Pound has also been attempting to rally this week but in the same vein as the Euro, its direction from here could be led by PCE inflation data due for release today.

The US Dollar has regained some ground on Wednesday but this is likely to be because of market positioning and month-end flows. Markets will watch for direction after inflation data due today.

Expected Ranges

  • GBP/USD: - ▲
  • GBP/EUR: - ▲
  • GBP/AUD: - ▲
  • EUR/USD: - ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.