USD gains on hot inflation

Market reports
Thanim Islam
  • USD to recapture form?
  • EU inflation and US manufacturing key.
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US Core PCE inflation came in as expected yesterday showing that inflation came in higher in January. Personal spending and income came in stronger as well causing broad USD gains across the board, seeing GBPUSD and EURUSD finishing lower on the week.


Market rates

*Daily move - against G10 rates at 7:30am, 01.03.24

** Indicative rates - interbank rates at 7:30am, 01.03.24


Data points



  • EUR: ECB Holzmann
  • USD: Fed Barkin, Bostic, Daly, Kugler
  • GBP: BoE Pill

Our thoughts

This morning's focus will be on February's inflation numbers which are expected to come in lower. The question is whether this will be enough to see a rate in next week's ECB meeting. It does seem unlikely at this stage given ECB’s Lagarde comments that they would want to see data from the whole of Q1 before electing to cut rates. Nonetheless a lower number today and we would expect some weakness in EUR.

As well as final PMI manufacturing numbers today, the US ISM manufacturing will be more important for USD moves today expected to show a minor pick up in activity, albeit the numbers remain in contraction territory. Should we see the numbers switch into contraction then we would see further USD gains on the basis that the data would reinforce the resilient US economy narrative.

Have a good weekend all!

Chart of the day

All eyes are on inflation numbers from Europe today. Both French and German numbers came in lower yesterday so there would be no surprise if we saw something similar with the overall EU number today. Unless we see a bigger drop in inflation than currently expected, the numbers will be unlikely to have any effect on the ECB meeting next week.

Source: Bloomberg Finance L.P.

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