US dollar index struggles to find direction
Daily Currency Update
Today the US Bureau of Labor Statistics reported that yearly inflation in the United States, as measured by the Consumer Price Index (CPI), weakened to 6% in February from 6.4% in January. On a monthly basis, the CPI was up 0.4% as expected by analysts. The USD’s immediate response to the February inflation data is still out for debate, the US dollar index (DXY) was nearly unchanged on the day at 103.630, compared to 103.692 before the data was released.The DXY is struggling to find traction today after the inflation report. The market has shown that the CPI release wasn't hot enough to scare the Federal Reserve which leaves them in a somewhat delicate position. Some analysts estimate that the Fed cannot fall behind the inflation curve as it risks credibility. Likewise, the delayed impact of previous tightening is now starting to surface, as seen through the recent Silicon Valley Bank (SVB) disaster.
Key Movers
GBP/USD pointed to a session high of 1.2200 but withdrew modestly with the initial reaction to US inflation data, which showed that the annual Consumer Price Index (CPI) declined to 6% in February, as expected. Unemployment claims in the UK fell by 11.2 thousand in February, against analysts' average forecast of a rise of 12.5 thousand. This strong employment data is pushing support for the pound. The technical picture for the GBP/USD remains bullish.EUR/USD continues to trade in its daily range above 1.0700 as investors assess how the February inflation numbers from the US will influence the Fed's policy outlook. Meanwhile, markets are also trying to figure out whether SVB failure will influence the European Central Bank's rate decision later this week.
The USD/CAD pair spreads its recent pullback from the 1.3860 mark, its highest level since October 2022, and remains under some selling pressure for the third successive day. The US CPI data release confirmed market expectations that the Fed could slow, or even pause its rate-hiking cycle in the aftermath of the strain on the US banking system. This strain also applies some pressure on the US dollar and appears to be a key factor weighing on the USD/CAD pair.
Expected Ranges
- EUR/USD: 1.0684 - 1.0747 ▲
- GBP/USD: 1.2137 - 1.2200 ▲
- AUD/USD: 0.6634 - 0.6712 ▲
- USD/CAD: 1.366 - 1.375 ▼