Markets Brace for US Inflation Data and Trade Uncertainty
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Daily Currency Update
The US dollar eased from its recent tariff-fuelled gains on Wednesday as traders turned their focus to upcoming inflation data and trade developments. Despite this pullback, hawkish remarks from Federal Reserve Chair Jerome Powell, helped provide some support to the greenback.With US CPI set for release today, market participants anticipate a slight uptick in core consumer inflation to 0.3% for January. Traders remain heavily long on the dollar, but a softer-than-expected inflation print could fuel expectations of Fed rate cuts, triggering a reversal in bullish dollar bets and increasing FX volatility.
Key Movers
The euro remains under pressure despite a strong performance in eurozone equities, with several indexes hitting record highs this year. ING analyst Chris Turner, notes that, historically, equity inflows have supported the euro, as such investments are largely unhedged in FX markets. However, current conditions suggest limited upside for the currency. Weak economic growth, a lack of fiscal stimulus, and expectations that the European Central Bank could cut interest rates by another 100 basis points this year dampen optimism. As a result, any euro recovery may struggle to gain traction in the FX market.Expected Ranges
- GBP/USD: 1.2405 - 1.2495 ▲
- GBP/EUR: 1.1975 - 1.2045 ▲
- GBP/AUD: 1.9775 - 1.9865 ▲
- EUR/USD: 1.0335 - 1.0395 ▼