Forex Market Today: Dollar Gains, AUD/NZD Rises, and Sterling Hits High on Retail Surge

By Cot-Trading - Friday, February 21, 2025 - No Comments

In recent developments, the U.S. dollar has strengthened as investors assess President Donald Trump's recent tariff threats. Despite a series of tariff announcements since Trump's return to office last month, analysts suggest these may serve more as negotiation tactics than concrete policy actions. Notably, Trump has hinted at a potential trade deal with China, which could significantly impact currency markets.

Earlier this week, the dollar's momentum was hindered by weak economic data and a lackluster sales forecast from Walmart, a key indicator of U.S. consumer spending. However, the overall fourth-quarter earnings season has been robust, with Walmart executives noting resilience among American consumers despite inflation remaining above the Federal Reserve's 2% target and concerns about tariffs affecting prices.

The U.S. dollar index, which measures the greenback against a basket of other currencies, rose 0.4% by 07:50 ET (12:50 GMT).

In Europe, the euro declined by 0.4% against the dollar to $1.0463, following data indicating a contraction in France's business activity and only modest growth in Germany. The British pound also edged down by 0.2% to $1.2639.

In Japan, core consumer prices increased by 3.2% in January compared to the previous year, marking the fastest rise in 19 months. This surge has fueled speculation that the Bank of Japan (BoJ) may consider further interest rate hikes, potentially reaching 0.75% in the third quarter of 2025, if wage growth and consumption continue to support sustained inflation. The yen reached a 2.5-month high against the U.S. dollar earlier in the day, reflecting market expectations of higher Japanese interest rates. However, BoJ Governor Kazuo Ueda indicated the bank might intervene to control long-term borrowing costs by purchasing government bonds.

Citi Predicts AUD/NZD Uptick Amid Potential NZD/JPY Decline

In a recent analysis, Citigroup anticipates a strengthening of the Australian dollar against the New Zealand dollar (AUD/NZD), while expressing caution over a possible downturn for the New Zealand dollar against the Japanese yen (NZD/JPY). This outlook is influenced by Australia's robust economic indicators and Japan's rising inflation rates, which may prompt the Bank of Japan to consider further interest rate hikes. Such monetary policy adjustments could impact currency valuations, leading to a potential depreciation of the New Zealand dollar relative to the yen.

Sterling Reaches Two-Month High as UK Retail Sales Surge

The British pound climbed to a two-month peak, trading at $1.2675, following a significant 1.7% increase in UK retail sales for January, as reported by the Office for National Statistics. This surge surpassed the anticipated 0.3% rise and marked the first uptick since August. Despite a downward revision of December's sales figures, the robust consumer spending in January suggests resilience in the UK's retail sector. However, economists caution that this momentum might not be sustained, given potential weaknesses in other areas of the economy, such as hospitality.

News Ticker