USD Steadies, GBP Holds Ground, EUR Faces Inflation Woes.

• USD: Struggles to gather recovery momentum, trading below 103.00 early Wednesday.
• GBP: Pound stabilizes against Euro at 1.17 after UK reports 0.2% month-on-month economic growth in January.
• EUR: Euro experiences volatility amid declining German inflation, falling to 2.5% in February.
• US Data: Tuesday’s US data shows slight uptick in inflation, with CPI rising to 3.2% year-on-year.
• Market Sentiment: Risk-positive market atmosphere limits USD strength despite rebound in US Treasury bond yields.

USD: The US Dollar (USD) faces challenges in gaining recovery momentum, hovering below 103.00 in early Wednesday trading. Despite a slight uptick on Tuesday, the USD Index (DXY) remains steady. Economic data releases from the US are not anticipated to have a high impact later in the day, while Eurozone Industrial Production data for January is awaited from Eurostat. Tuesday’s US data showed a slight uptick in inflation, with the Consumer Price Index (CPI) rising to 3.2% year-on-year and both CPI and Core CPI climbing 0.4% month-on-month. Although the benchmark 10-year US Treasury bond yield rebounded above 4.1%, a risk-positive market sentiment prevented sustained USD strength, with US stock index futures trading mixed.

GBP: The Pound to Euro exchange rate stabilizes at 1.17 following the Office for National Statistics (ONS) reporting 0.2% month-on-month economic growth in January. Against the Dollar, the Pound was quoted at 1.2790. The growth figure met investor expectations and marked an improvement from December’s -0.1%. Notably, a recovery in the services sector, indicated by January’s retail figures, along with a surge in construction output, contributed to the growth. Despite mixed data, economists anticipate the UK economy to gradually recover from its recent downturn. While manufacturing production remained unchanged in January, industrial production disappointed with a -0.2% outcome, indicating a tepid recovery trend.

EUR: The Euro (EUR) experienced volatility on Tuesday amidst declining German inflation. February’s yearly inflation rate fell to 2.5%, a decrease from 2.9%, marking a thirty-two-month low in Germany. Factors contributing to the decline include deflation in food prices, particularly fresh vegetables and dairy products. Speculations regarding potential monetary policy adjustments by the European Central Bank (ECB) emerged as German inflation approached the ECB’s 2% target rate. Ruth Brand, President of the Federal Statistical Office, highlighted the slowing inflation rate, particularly in energy products and food prices. Amidst increasing bets on interest rate cuts, EUR faced challenges in gaining investor support throughout the session.