Daily Currency Update

USD - US Dollar

The USD is down for the fourth consecutive day, a trend not seen since last year. This decline reflects caution ahead of Fed Chairman Powell's speech to US lawmakers. While Powell may not provide significant insight into policy, he's expected to echo recent messaging on inflation progress and the need for further work. Market participants are wary of potential hints at rate cuts. Powell's speech is scheduled for 10ET, with prepared remarks likely released around 8.30ET. Additionally, the Fed's Beige Book will be released at 14ET. Data-wise, we'll see ADP jobs, Wholesale Inventories, and JOLTS data.

CAD - Canadian Dollar

The CAD remains relatively stable against the weakening US dollar, as markets approach the Bank of Canada's (BoC) policy decision at 9.45ET with caution. No adjustments to the 5.00% overnight rate are anticipated. It's unlikely that either the policy statement or Governor Macklem’s press conference (scheduled for 10.30ET) will offer significant new insights into rate expectations. While the economy isn't robust, it also isn't as weak as previously feared. Inflation is on a downward trend, with slow progress on core inflation. The housing market has undergone corrections, yet prices remain resilient. Furthermore, with the federal budget on the horizon in April, there's diminished incentive for the BoC to adopt a more accommodative stance while uncertainties persist in government fiscal policy plans. Observe USD/CAD trends.

EUR - Euro

The EUR is seeing slight gains today, but its impact on pressuring the DXY index is significant. Overnight increases brought it close to the high 1.08s once more, and further progress beyond recent peaks will bolster short-term momentum for the euro, potentially increasing pressure on the US dollar. Today's data revealed a strong trade surplus for Germany in January, with exports increasing by 6.3%. However, January's Eurozone Retail Sales only rose by 0.1% month-on-month, slightly below expectations.

GBP - British Pound

The GBP is following the overall trend of the US dollar, showing moderate gains as Chancellor Hunt prepares to present what amounts to a pre-election budget. The main announcements have already been communicated to the press, notably a 2p reduction in National Insurance. While additional giveaways may be considered as the Tories confront unfavorable polling and an impending election, the chancellor's flexibility is constrained by government finances and the recent Truss government controversy. The February Construction PMI climbed to 49.7, marking its highest level since last August.