A similar day yesterday as Monday with a shade of USD weakness, but limited to recent moves. Fed and BoE speak failed to do anything to markets as well.
*Daily move - against G10 rates at 7:30am, 28.02.24
** Indicative rates - interbank rates at 7:30am, 28.02.24
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Today's focus will be on the second estimates of Q4 GDP, and core PCE from the US. It will need a significant deviation from the first readings to cause a big move on USD as these numbers are backwards looking. Hopefully Fed speak from Bostic, Collins, and Williams can wake this sleepy market. Worth noting (as per the Chart of the Day section), that USD may not get any additional support from rate cut projections now that the market view is inline with the Fed. So it seems, general risk appetite will be the driver in FX.
We only have to look back to the start of the year when the markets were pricing in 150 bps worth of rate cuts by the Fed this year, versus the Fed’s projections of only 75 bps worth of cuts. The markets view has since been steadily falling inline with the Fed supporting USD. However, since the 13th February, when we had the uptick in US CPI numbers, the correlation between market pricing for rate cuts and USD has decoupled. So the question now is… what will cause USD to extend the gains its made this year?
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