In early European trade, the U.S. dollar retreated as risk sentiment improved following Nvidia’s stellar earnings, while traders awaited the release of crucial business activity surveys for insights into the global economy’s health. The Dollar Index, which tracks the greenback against a basket of currencies, traded 0.4% lower at 103.472, marking a decline of nearly 1% for the week.
The boost in risk sentiment, driven by Nvidia’s strong earnings, favored more cyclical currencies over the safe-haven dollar. While the greenback has come off recent highs, it remains over 2% higher for the year. Traders have scaled back expectations for aggressive rate cuts by the Federal Reserve, especially after the release of minutes from the Fed’s late-January meeting, which indicated a reluctance to reduce interest rates in the near term.
Market attention now turns to the release of weekly unemployment data and, more significantly, the manufacturing and services PMI data for February to assess the underlying strength of the economy.
EUR/USD rose 0.5% to 1.0869 in European trading, supported by a more positive investment environment. The latest PMI data for Europe showed challenges in the German economy, but there were signs of improvement in French numbers. The eurozone’s services PMI climbed to 50.0, indicating expansion, while the composite index exceeded forecasts at 48.9. Eurozone manufacturing, however, continued to face challenges.
GBP/USD traded 0.5% higher at 1.2701, with expectations for strong expansion in the U.K.’s dominant services sector based on upcoming PMI data.
USD/TRY rose 0.4% to 31.0335 ahead of the latest meeting of Turkey’s central bank, where interest rates are expected to remain unchanged at 45%. The Turkish lira leads emerging market currency performance this year, delivering 3% total return gains against the dollar.
Analysts anticipate the dollar to stay bid in the coming weeks, potentially turning lower in March on the back of softer payrolls and CPI figures, despite a strong January core PCE release expected on February 29th.