Here is what you need to know on Thursday, February 3:
The dollar managed to stage a modest rebound in the late American session on Wednesday but the US Dollar Index ended up closing the fourth straight trading day in the negative territory. Ahead of the European Central Bank's (ECB) and the Bank of England's (BOE) highly anticipated policy announcements, major currency pairs stay relatively quiet. Later in the session, weekly Initial Jobless Claims, December Factory Orders and January ISM Services PMI will be featured in the US economic docket.
Meanwhile, US stocks futures indexes are down between 0.3% and 0.5%, pointing to a cautious market mood early Thursday.
The ECB is widely expected to keep its policy settings unchanged following the February policy meeting but ECB President Christine Lagarde's comments on the inflation outlook will be watched closely by market participants. On Wednesday, Eurostat reported that the annual HICP in the euro area reached an all-time high of 5.1% in January.
ECB February Preview: Euro bulls hope for a hawkish ECB on hot EU inflation.
The BOE is set to hike its policy rate by 25 basis points to 0.5%. Investors want to know how the bank plans to unwind its massive QE and whether or not additional rate hikes will be needed later this year.
BOE Preview: Bailey needs to go beyond a rate hike to boost GBP/USD on Super Thursday.
EUR/USD climbed to a fresh weekly high of 1.1331 on Wednesday before going into a consolidation phase around 1.1300 early Thursday. A hawkish ECB tone could help the euro continue to gather strength against the dollar and vice versa.
GBP/USD advanced toward 1.3600 but lost its traction. The pair was last seen posting small daily losses around 1.3550.
USD/JPY is moving sideways in a narrow band around mid-114.00s in the early European session. The benchmark 10-year US Treasury bond yield continues to fluctuate between 1.8% and 1.75%, making it difficult for the pair to make a decisive move in either direction.
Gold extended its rebound to $1,811 on Wednesday but started to retreat toward $1,800 early Thursday.
After rising toward the key $40,000 mark on Thursday, Bitcoin reversed its direction and lost more than 4% on a daily basis. BTC was last seen trading at around $37,000. Ethereum snapped a two-day winning streak on Wednesday and continues to edge lower toward $2,600.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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