Global Forex Market: US Dollar Weakens Amid Disappointing Economic Data

US Dollar weakness persisted as lackluster economic data and declining Treasury yields pressured the currency. The US Dollar Index (DXY), which tracks the greenback against a basket of major currencies, dropped after initial jobless claims rose to 219,000 from 214,000, indicating labor market strain. Additionally, the 10-year US Treasury yield fell below 4.5%, making the US Dollar less attractive to investors. Market participants remain cautious as fresh data, including the US Purchasing Managers’ Index (PMI), signals slowing momentum in the service sector, heightening concerns over the economy.

US PMI Data Highlights Economic Slowdown

The latest S&P Global PMI data painted a mixed picture of the US economy. The Composite PMI fell to 50.4 from 52.7, suggesting a loss of business activity. While the Manufacturing PMI ticked up from 51.2 to 51.6, reflecting continued expansion, the Services PMI unexpectedly declined from 52.9 to 49.7, slipping into contraction. This weaker services data has raised concerns about economic stability, with analysts attributing the decline to federal policies, trade tariffs, and global uncertainty. Despite manufacturing’s resilience, the unexpected weakness in the services sector has fueled speculation about potential Federal Reserve policy adjustments.

Euro and GBP React to Economic Data and Political Developments

The Euro and British Pound (GBP) experienced fluctuations due to economic data and upcoming political events. In the Eurozone, PMI readings from Germany and the broader region remained above 50, indicating ongoing business expansion. However, any drop below this threshold could pressure the Euro. Meanwhile, Germany’s general elections on February 23rd may influence investor sentiment, with traders potentially adjusting positions ahead of the event. In the UK, strong retail sales data lent support to the GBP, though mixed PMI figures created uncertainty. While the UK manufacturing sector contracted further, slight improvement in services activity added some balance, leading to volatility in GBP/USD movements.

Key Global Economic Events Impacting Forex Markets

• February 26, 2025: Australian Monthly CPI (YoY) – A major inflation metric influencing the AUD and RBA policy.
• February 27, 2025: Swiss GDP (QoQ) – A key growth indicator for the CHF, impacting market sentiment.
• February 27, 2025: US GDP Annualized – A significant release for the US Dollar; strong growth may support the currency.
• February 27, 2025: Tokyo CPI (YoY) – A crucial inflation gauge affecting BOJ monetary policy and JPY movement.
• February 28, 2025: Eurozone Retail Sales (YoY) – Consumer spending data that could drive EUR fluctuations.
• February 28, 2025: Eurozone CPI (MoM & YoY) – Inflation figures with potential ECB policy implications.
• February 28, 2025: Canadian GDP Annualized – A key data point for CAD traders assessing economic strength.

With these upcoming economic events, forex markets are likely to see continued volatility, especially as traders assess the US Dollar’s trajectory amid ongoing economic uncertainty.

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