Investing.com - The U.S. dollar retreated in early European trade Thursday, with risk sentiment boosted by Nvidia’s stellar earnings, with traders awaiting the release of key business activity surveys for clues of the health of the global economy.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower to 103.472, down approaching 1% so far this week.
Risk sentiment hits dollar
Strong earnings from AI darling Nvidia (NASDAQ:NVDA) have boosted global confidence, resulting in a hit to the safe haven dollar to the benefit of the more cyclical currencies.
The greenback has come off highs this week, but remained more than 2% higher for the year, as traders pared back aggressive bets for a slew of rate cuts by the Federal Reserve this year.
The minutes of the Fed’s late-January meeting, released on Wednesday, showed that the bank was in no hurry to reduce interest rates in the near-term. Addresses from several Fed officials this week also reiterated this hawkish stance, with policymakers citing concerns over sticky inflation.
Attention now turns to the release of weekly unemployment data and, more importantly, the manufacturing and services PMI data for February, for a gauge of the underlying strength of the economy.
“Our game plan here sees the dollar staying bid for the next couple of weeks - we should get a strong January core PCE release on February 29th - and then turning lower in March on what should be a softer payrolls report and a softer February CPI figure,” said analysts at ING, in a note.
Eurozone services PMI impress
In Europe, EUR/USD rose 0.5% to 1.0869, with the euro helped by the more positive investment environment.
The latest PMI data out of Europe showed that the German economy remained in a difficult place, while French numbers have started to show distinct improvement.
The news was more positive for the eurozone as a whole, with the services PMI climbing to 50.0, the level that separates expansion from contraction, while the composite index rose more than forecast to 48.9.
Eurozone manufacturing was still in a tricky situation though.
GBP/USD traded 0.5% higher at 1.2701, with U.K. PMI data expected to show strong expansion in the country’s dominant services sector.
USD/TRY rose 0.4% to 31.0335 ahead of the latest meeting of Turkey’s central bank, which is expected to result in interest rates remaining unchanged at 45%.
“Looking at EM currency performance this year we note that the Turkish lira leads the pack in delivering 3% total return gains against the dollar this year,” added ING.
Yen still weak after PMI data
USD/JPY traded largely unchanged at 150.25, with the pair remaining above the widely-watched 150 level after weaker-than-expected PMI data weighed, as manufacturing activity shrank further in February while growth in services worsened.
Still, markets remained on watch for any intervention in currency markets by the Japanese government, following some verbal warnings from ministers last week.
In Asia, USD/CNY edged higher to 7.1902, slipping back towards the 7.2 level as investors remained doubtful over an economic rebound in the country.
Bigger losses in the yuan were held back by signs of government intervention in currency markets this week.