The US dollar traded in a narrow range as traders waited for new economic data for more clarity on its potential direction.
The currency stabilized to a certain extent as expectations for a March rate cut have diminished, reducing pressures on the dollar, while recent labor market data indicates a more robust economy.
At the same time, markets continue to see multiple rate cuts this year which could remain a risk for the dollar over the medium term.
Additionally, inflation expectations continued to decline supporting the narrative around interest rate cuts. Thursday’s CPI could significantly affect the dollar’s trajectory.
The Euro was seeing limited movements as well and continued to see some pressure from lower-than-expected economic data in Germany. German industrial production declined while the largest economy in the euro area continued to see difficulties.
At the same time, consumer confidence in the eurozone improved to a certain extent while retail sales’ in the area declined less than expected. While the latter could lend some support to the currency, risks could remain.
Despite some volatility, the British pound has been trading in a range for the last few weeks. While the pound could continue to find support in the Bank of England’s position and high interest rates, economic data continues to weigh on the currency.
Today’s retail sales data showed lower than expected growth with the economy feeling the weight of elevated rates. As a result, the currency could remain on an uncertain path over the short term.