Investing.com – The U.S. dollar fell in early European trade on Thursday, with risk sentiment boosted by stellar earnings from Nvidia as traders await the release of key business activity reports that will provide insight into the health of the global economy.
At 04:10 ET (0910 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.4% lower at 103.472, having fallen nearly 1% this week.
Risk sentiment hits the dollar
Strong earnings from AI darling Nvidia (NASDAQ:) boosted global confidence, sending the safe-haven dollar under pressure in favor of more cyclical currencies.
The dollar retreated from highs this week but remained more than 2% higher for the year as traders backed away from aggressive bets on a big Federal Reserve rate cut this year.
The results of the Federal Reserve’s meeting in late January, published on Wednesday, showed that the bank is in no hurry to cut interest rates in the short term. Speeches by several Fed officials this week also reiterated that hawkish stance, with policymakers citing concerns about persistent inflation.
Attention now turns to the release of weekly and, more importantly, February PMI data, which will serve as a gauge of the underlying strength of the economy.
“Our roadmap assumes the dollar will remain buoyant over the next few weeks – we should get a strong January main PCE release on February 29 – and then move lower in March on the back of a softer payrolls report and a softer CPI reading. for February. ING analysts said in a note.
Eurozone services PMI is impressive
In Europe, the euro rose 0.5% to 1.0869, helped by a more positive investment environment.
The latest European PMI data showed that Germany’s economy remains struggling, while France’s performance has begun to show clear improvement.
The news was more positive for the eurozone as a whole, with the index rising to 50.0, the level separating expansion from contraction, while the index rose more than expected to 48.9.
However, the eurozone remained in a difficult situation.
traded 0.5% higher at 1.2701, with UK PMI data expected to show strong growth in the country’s dominant sector.
rose 0.4% to 31.0335 ahead of the Bank of America’s latest meeting, which is expected to leave interest rates unchanged at 45%.
“Looking at the performance of emerging market currencies this year, we note that the Turkish lira is leading the way in delivering 3% of the overall return gains against the dollar this year,” ING added.
Yen still weak after PMI data
trading little changed at 150.25, with the pair remaining above the widely watched 150 level after weaker-than-expected PMI data weighed on as activity weakened further in February and growth deteriorated.
However, markets continue to monitor any intervention by the Japanese government in foreign exchange markets following some verbal warnings from ministers last week.
In Asia, the index rose to 7.1902 before falling back to 7.2 as investors remained doubtful about the country’s economic recovery.
Big losses in the yuan were capped by signs of government intervention in currency markets this week.