Home Daily Commentaries US dollar remains stable following PCE data release

US dollar remains stable following PCE data release

Daily Currency Update

The US dollar stabilized following the release of the US Personal Consumption Expenditures (PCE) Price Index data. The US Core PCE inflation index edged lower to 2.8% as expected. Yearly PCE declined to 2.4% as well. The PCE data didn’t seem to affect the markets significantly, leaving the USD mostly unchanged. The greenback is fluctuated around 104 but seemed unable to break free from this level in either direction. The dollar remained stable against most major currencies. In other data news, the Weekly Initial Jobless Claims increased from 202,000 to 215,000, while Continuing Jobless Claims rose from 1.860 million to 1.905 million. Existing Home Sales decreased from 5.7% to -4.9%, indicating a contraction in this segment.

Key Movers

The euro remained above the USD$1.08 level due to US PCE figures, in line with expectations, influencing the USD. Additionally, lower-than-anticipated German inflation data created an opportunity for the European Central Bank (ECB) to possibly start rate cuts as early as June. The most recent report from Germany indicated a deceleration in headline inflation in February, dropping to 2.5%, below the market's anticipated 2.6% and marking the lowest level since mid-2021.

The pound maintained relative stability at USD$1.265, bolstered by positive signals from the Bank of England's (BoE) monetary indicators. In January, mortgage approvals saw a notable increase, reaching 55,200. This was the highest level since October 2022 and surpassed market expectations of 52,000. Furthermore, there was a larger-than-expected surge in consumer lending, with a net increase of £1.9 billion, surpassing forecasts that had predicted a rise of £1.6 billion. Investors are anticipating the BoE will implement the first rate cut in August, while concurrently discounting a similar move by the Federal Reserve and the ECB in June. The AUD dipped below USD$0.652, reaching its lowest levels in 2 weeks as investors responded to domestic inflation figures that fell short of expectations. Data revealed that Australia's monthly inflation Consumer Price Index (CPI) remained at a two-year low of 3.4% in January which was below the anticipated 3.6%. On the economic front, Australian monthly retail sales increased by 1.1% in January, falling short of the expected 1.5% gain.

Rebounding from the near three-month low, the Canadian dollar made up ground this morning, supported by robust Gross Domestic Product (GDP) data. In the fourth quarter of 2023, the Canadian GDP expanded by an annualized 1%, exceeding market expectations of 0.8%. Additionally, the contraction in the third quarter of last year was revised lower, and preliminary data for January indicated significant growth. These findings highlighted the resilience of the Canadian economy, granting the Bank of Canada (BoC) more time to assess the appropriate timing and extent of potential rate cuts throughout the year. These reports also showed the strength of the Loonie by emphasizing robust foreign demand for Canadian energy exports and facilitating the influx of foreign exchange into the country.

Expected Ranges

  • EUR/USD: 1.0854 - 1.0807 ▲
  • GBP/USD: 1.2678 - 1.2635 ▲
  • AUD/USD: 0.6487 - 0.6527 ▼
  • USD/CAD: 1.3545 - 1.3598 ▲

Written by

Swati Kathuria

OFXpert

As a Senior Analyst Financial Risk, Swathi looks at client portfolios, assessing margin calls, mark to market, and other intricate financial data. Her role involves a myriad of layers. She not only examines data to identify potential risks and opportunities for the business, but she also works closely with her team and other teams to provide valuable insights and recommendations on risk mitigation.