The U.S. Dollar is
exhibiting a neutral trend this week, with the U.S. Dollar index showing a
slight 0.1% increase to 103.93 points. The EURUSD pair
remains mostly unchanged, hovering slightly above the resistance at
1.08200-1.08400. In the previous week, the pair retraced to 1.08000 after
approaching 1.09400.
Macroeconomic data in the United States is
favoring the weakening of the Dollar. The U.S. Q4 2023 GDP estimate was revised
down to 3.2% QoQ from the previous 3.3%, while the Atlanta Federal Reserve (Fed)
lowered its Q1 2024 GDP estimate to 2.1% QoQ from the earlier projection of
3.0%. Additionally, the number of jobless claims is on the rise. Although the
Dollar could find some support from increasing PMI numbers in the manufacturing
sector—Markit Manufacturing PMI in February rose to 52.2 points from 50.7
points—this was offset by a drop in the ISM Manufacturing PMI to 49.1 points
from 47.8 points.
Investors may be hesitant to make significant
moves ahead of upcoming important news. The WisdomTree Bloomberg U.S. Bullish
Dollar Fund (USDU) reported minimal capital inflows of $1.3 million last week,
indicating that investors are awaiting more reliable signals for the direction
of the Greenback. Such signals may emerge during Fed Chair Jerome Powell's testimony
scheduled for Wednesday and Thursday. The meeting of the European Central Bank
(ECB) on Thursday could also provide signals, potentially impacting the euro if
the ECB continues to delay interest rate cuts.
Powell is expected to maintain a relatively hawkish
rhetoric, as a cooling American economy should not outweigh persistently high
inflation numbers showing signs of acceleration. This is likely preventing a
significant weakening of the Dollar. The next data release on U.S. inflation
for February is scheduled for March 12. If the EURUSD remains within the range
of 1.08000-1.08500 on this news, the pair may remain unchanged before the Fed
meeting on March 20.
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