Home Daily Commentaries USD in Doldrums or Buoyancy – Markets continue to watch

USD in Doldrums or Buoyancy – Markets continue to watch

Tuesday 24 January, 2023

Daily Currency Update

The US dollar showed a modest uptick, supported by further recovery in the US Treasury bond yields, resulting in maintaining a cap on any further gains. Meanwhile the USD boost lacked bullish conviction amidst growing acceptance that the Fed will stick to softening its hawkish outlook. The current market pricing signals a significant chance of a smaller 25 bps rate hike coming up in February. The equity markets showcased a decently positive tone, that acted as an upside push for the safe-haven greenback, with significant support continuing for the major, at least for now. USD Index has increased to daily highs passing slightly above the 102.00 mark ahead of flash PMIs.

Key Movers

The Eurozone’s PMI rose to 50.2 in January from 49.3 in December, this growing number shows a decent rise in the manufacturing and service sectors. This fresh evidence indicates that Europe’s economy could confound expectations and dodge a recession this year. The return to humble growth was aided by tumbling energy costs and an easing of supply chain stress, which helped temper the rising input costs for producers. The UK’s economy on the other hand contracted sharply, the PMI numbers showed a steep decline in the business activity in the last two years. The PMI reading fell to 47.8 in January, from 49 in December, indicating that low consumer confidence depressed activity in the dominant services sector. WTI was seen to be juggling around the $81.50 levels as the upside is capped due to escalating recession worries in the United States, while the downside is restricted amidst confidence over economic recovery in China.

Expected Ranges

  • EUR/USD: 1.0842 - 1.0895 ▲
  • GBP/USD: 1.2277 - 1.2412 ▲
  • AUD/USD: 0.7001 - 0.7052 ▲
  • USD/CAD: 1.3349 - 1.3406 ▼