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Forex Today: US Dollar regains its footing following Monday's correction

Here is what you need to know on Tuesday, February 28:

The positive shift witnessed in risk mood and mixed macroeconomic data releases from the US weighed on the US Dollar (USD) and the US Dollar Index (DXY) snapped a four-day winning streak on Monday. Early Tuesday, the DXY clings to modest recovery gains as investors await the Conference Board's consumer Confidence Survey for February. The US economic docket will also feature January Trade Balance data and Statistics Canada will release the Gross Domestic Product figure for the fourth quarter. Several Bank of England policymakers are scheduled to speak later in the session.

US CB Consumer Confidence Preview: Focus on possible recession-related hints.

The US Census Bureau reported on Monday that Durable Goods Orders declined by 4.5% on a monthly basis in January, compared to the market expectation for a contraction of 4%. Although other data from the US revealed that Pending Home Sales rose by 8.1% in January, the US Dollar struggled to find demand with risk flows dominating the financial markets. In the early European morning on Tuesday, US stock index futures are trading flat while the 10-year US Treasury bond yield moves sideways above 3.9% following Monday's modest retreat.

EUR/USD took advantage of the broad USD weakness and gained more than 50 pips on Monday. The pair, however, seems to be struggling to preserve its recovery momentum and was last seen trading in negative territory slightly below 1.0600.

Fueled by the improving market mood, GBP/USD surged higher and closed the day above 1.2000. The pair stays in a consolidation phase below 1.2050 early Tuesday. British Prime Minister Rishi Sunak announced late Monday that they have amended the original Northern Ireland Protocol deal and agreed on a new "Windsor framework" with the European Union. 

USD/JPY managed to hold above 136.00 despite the selling pressure surrounding the USD on Monday. During the Asian trading hours, Incoming Bank of Japan (BoJ) Deputy Governor Ryozo Himino reiterated that they need to continue to support the economy with easy monetary policy. "We must debate specifics of exit policy only when stable, sustained achievement of the BoJ's price target comes into sight," Himino added.

The data from New Zealand showed early Tuesday that the ANZ Business Confidence Index improved to -43.3 in February from -52 in January, coming in better than the market expectation of -61. NZD/USD failed to capitalize on the upbeat sentiment data and was last seen trading in negative territory slightly below 0.6150.

Retail Sales in Australia recovered in January, rising 1.9% on a monthly basis following December's 3.9% decline. Although AUD/USD edged higher with the initial reaction to this data, it lost its traction in the European morning and started to decline toward 0.6700.

The Canadian economy is forecast to contract by 0.2% on a quarterly basis in the fourth quarter after having expanded by 0.7% in the previous quarter. Ahead of the GDP report, USD/CAD fluctuates in a narrow range slightly below 1.3600.

Gold price posted marginal gains on Monday as the pullback in the US Treasury bond yields remained limited. XAU/USD edges lower toward $1,810 in the early European session.

Bitcoin failed to make a decisive move in either direction and closed the first trading day of the week virtually unchanged. BTC/USD stays under modest bearish pressure early Tuesday and trades below $23,500. Ethereum continues to inch lower toward $1,600 after having registered small losses on Monday.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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