Dollar under pressure, yen weakens, pound continues recovery – London Business News

The dollar index faced continued pressure as market participants absorbed a series of disappointing economic reports from the U.S. alongside comments from key central bank officials.

The latest data showed a contraction in the U.S. manufacturing sector for the 16th consecutive month in February, the longest stretch in 22 years, with the ISM’s PMI survey indicating a faster-than-expected decline.

Additionally, the Michigan consumer survey revealed weakened morale for February, reflecting deteriorating expectations and current conditions. Central bank officials provided cautious signals, with NY Fed President Williams anticipating rate cuts later in the year.

At the same time, Richmond Fed President Barkin cautioned against premature predictions, citing persistent price pressures. Chicago Fed Bank President Goolsbee expressed concerns about housing inflation’s unexpectedly robust pace. Market focus shifted towards upcoming events, including the ISM Services PMI for February and Fed Chair Powell’s testimony, which could fuel the dollar’s volatility.

Wednesday also brings the JOLTs Job Openings report, anticipated to decline from the previous month. These events, combined with potentially weaker economic data, may foster negative sentiment towards the U.S. dollar.

The Japanese yen continues to weaken against the dollar following comments from Bank of Japan Governor Kazuo Ueda, emphasising the need for further data to determine the sustained achievement of the central bank’s 2% target.

On Friday, market attention will be on Japan’s January Current Account, with consensus data projecting a shift from surplus to deficit (JPY -330.4 billion), weighing towards a negative outlook for the yen. Tomorrow’s inflation data could also affect monetary policy expectations and could fuel some volatility.

Meanwhile, the British pound continued its recovery, supported by positive housing market data and expectations of a Bank of England rate cut in August.

A 1.2% year-on-year increase in British house prices for February was reported nationwide, the first annual uptick over a year. The market anticipates the S&P Global Services PMI Final for February to remain unchanged and awaits Finance Minister Jeremy Hunt’s budget announcement on Wednesday.