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US dollar edges lower on broad-based optimism

 

Friday, February 23, 2024

Today’s headlines

What’s happening: The US dollar edged lower on Thursday, as investors assessed the latest economic reports.

What happened: The greenback came under pressure during Thursday’s session, while global stock markets surged to record highs.

The EUR/USD forex pair climbed to its strongest level in around three weeks but pared back some gains later in the session.

Why it matters: Several equity markets around the world hit record highs, with optimism weighing on the greenback on Thursday. Share benchmarks in Japan and Europe climbed to all-time highs, while the US Nasdaq 100 breached the 18,000 mark.

US data released on Thursday showed initial jobless claims declining by 12,000 to 201,000 last week, versus market views of 218,000. The flash manufacturing PMI (Purchasing Managers’ Index) for the US increased to 51.5 in February, from 50.7 a month ago, while services PMI declined to 51.3, from 52.5 in January.

The PMI data from the Eurozone showed that the downturn in business activity had eased in February, with the services sector ending a six-month streak of contractions, offsetting a decline in manufacturing activity. The HCOB Eurozone services PMI rose to 50 in February, while manufacturing PMI slipped to 46.1 during the month.

The euro hit its highest mark in about three weeks on upbeat activity data from France. The currency pared some gains later in the session, following weak data from Germany. The composite PMI for Germany declined to 46.1 in February, from 47.0 a month ago.

The EUR/USD pair gained around 0.1% to 1.0825 on Thursday.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell slightly to 103.96 on Thursday, on track to record its first weekly loss of 2024. However, the dollar index is up more than 2% for the year, with markets no longer expecting aggressive rate cuts by the US Federal Reserve in 2024.

Minutes from the latest Fed policy meeting reiterated that the US central bank was is in no hurry to cut interest rates.

The GBP/USD forex pair added around 0.2% to 1.2661 during the session, following the release of UK PMI data. The S&P Global UK manufacturing PMI increased to 47.1 in February, from January’s level of 47.

What to watch: With no major economic report due to be released today, investors await data on GDP growth rate and core PCE price index from the US next week. The US economy is expected to expand by an annualised 3.3% in the fourth quarter, marking a slowdown from the 4.9% recorded in the third quarter.

The markets today

Oil prices will be in focus today ahead of crude oil rigs data from the US

Context: Crude oil prices moved higher on Thursday as investors digested the release of data on inventories from the US government.

Details: The EIA (Energy Information Administration) said crude oil inventories in the US had climbed by 3.5 million barrels to 442.9 million barrels in the week ending February 16, following outages at large refineries. However, the figure came in below market estimates of a gain of 3.879 million barrels.

BP’s Whiting, Indiana refinery is expected to restart operations by the end of this month and return to full production in March, following a power outage from February 1.

Crude stockpiles at the Cushing, Oklahoma delivery hub rose by 741,000 barrels, compared to an increase of 710,000 barrels a week ago. Data released by the EIA also showed gasoline stockpiles falling by 294,000, and distillate stockpiles declining by 4.009 million barrels last week.

Rising geopolitical concerns also provided a boost to oil prices during the session.

WTI crude oil for April delivery gained 70 cents to settle at $78.61 per barrel, while Brent crude for April delivery gained 64 cents to $83.67 per barrel on Thursday.

In other energy trading, wholesale gasoline for March delivery added 4 cents to $2.33 a gallon, while March heating gained 4 cents to $2.75 a gallon. March natural gas declined 4 cents to $1.73 per 1,000 cubic feet.

What to watch: Investors await the release of data on US Baker Hughes crude oil rigs today. Crude oil rigs in the US fell to 497 in the week ending February 16, compared to 499 in the prior week.

Other Markets: European indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.29%, 1.47%, 1.27% and 0.82%, respectively.

The news shaping the markets

The US is looking to impose hundreds of sanctions on Russia. The news sent the RUB/USD pair lower in forex trading this morning.


Thailand’s car sales dipped 16.42% year-over-year to 54,811 units in January, exerting pressure on the THB/USD forex pair.


China’s new home prices fell by 0.7% year-over-year in January, following a 0.4% decline a month ago. The country’s home prices declining for the seventh consecutive month sent the CNY/USD pair lower in forex trading this morning.


UK’s GfK consumer confidence indicator declined to -21 in February, versus January’s reading of -19. The figure coming in much worse than the expectations of an improvement to -18 exerted pressure on the GBP/USD forex pair.


Peru’s economy shrank by 0.4% year-over-year in the fourth quarter, versus a 1% decline in the prior period, which sent the PEN/USD pair higher in forex trading this morning.

What else to watch today

Germany’s GDP growth rate, Ifo business climate indicator, Ifo current conditions indicator and Ifo expectations indicator, Turkey’s manufacturing confidence index, capacity utilisation and tourist arrivals, Brazil’s FGV-IBRE consumer confidence index, India’s bank loan growth, banks’ deposits and foreign exchange reserves, Argentina’s consumer confidence indicator, Mexico’s current account, Canada’s government budget value, US Baker Hughes total rigs, Eurozone’s inflation expectations over next 12 months, as well as China’s foreign direct investment.


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